Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

NEW WRIT

For the county constituency of South-East Staffordshire, in the room of Sir David Lincoln Lightbown, deceased.—[Mr. Goodlad.]

PRIVATE BUSINESS

BODMIN MOOR COMMONS BILL [Lords]

Order for Second Reading read.

To be read a Second time tomorrow.

Oral Answers to Questions — HEALTH

Disability Living Allowance

Mr. Turner: To ask the Secretary of State for Health what representations he has received on how the changes to the disability living allowance regulations have affected current NHS patients. [18384]

The Parliamentary Under-Secretary of State for Health (Mr. John Bowis): None. I have received copies of three letters to the Department of Social Security.

Mr. Turner: Does the Minister agree that reducing or abolishing mobility payments will have an adverse effect on the lives of disabled people everywhere?

Mr. Bowis: The hon. Gentleman is not one of the three people who have written to me about that subject. I am not surprised because, as an experienced Member of Parliament, he will know that it is entirely a matter for my right hon. Friend the Secretary of State for Social Security.

Mr. Tom Clarke: This is an important matter for 6.5 million disabled people. Do the Government accept that getting the issue right, in co-operation with the Disablement Income Group, will affect those who suffer from spinal cord injuries, for example? They are not supported by the national health service trusts, which have let them down by not making available the kind of services that they need. Why should disabled people pay for the Government's incompetence and insensitivity?

Mr. Bowis: The question on the Order Paper is not a matter for the Department of Health. The hon. Gentleman

has raised issues that relate to my Department, which will play a full part in looking after the interests of disabled people, as he well knows. We have legislation on direct payments before Parliament and—as the hon. Gentleman might have had the grace and courtesy to remind the House and the public—only a few days ago we announced the introduction of the new powered indoor-outdoor wheelchair service for severely disabled people.

Organophosphate Poisoning

Mr. Llwyd: To ask the Secretary of State for Health how many known cases of organophosphate poisoning in England and Wales in 1994 and 1995 were notified to his Department; and if he will make a statement. [18385]

The Parliamentary Under-Secretary of State for Health (Mr. John Horam): Suspected adverse reactions involving veterinary medicines are notified to the Veterinary Medicines Directorate and those involving pesticides to the Health and Safety Executive, and my Department is informed. Some 47 suspected adverse reactions to organophosphate sheep dips were reported in 1994 and 40 provisionally in 1995 in the United Kingdom. There were 29 cases of suspected organophosphate poisoning from pesticides in Great Britain in 1993–94 and 43 in 1994–95. My Department will shortly be publishing updated guidance for doctors on pesticide poisoning, which includes a reminder of the notification schemes.

Mr. Llwyd: I take no comfort from the Minister's answer, bearing in mind the fact that, since 1985, the Health and Safety Executive has made it a notifiable occurrence. Before long, the Government will be viewed by history as another Nero, who fiddled while Rome burned. While the Department of Health has played ping-pong with the subject—throwing it back and forth to the Ministry of Agriculture, Fisheries and Food—thousands of people in England, Wales and Scotland have fallen ill with that terrible disease. When will the Department get to grips with the problem by ensuring that those substances are banned and compensating the thousands of people who have suffered as a result of the illness?

Mr. Horam: As the hon. Gentleman will be aware, the Veterinary Products Committee, which is the appropriate authority, has always said that the pesticides should not be banned. As I said in my original reply, we are issuing new guidance to doctors. The hon. Gentleman will also be aware that the Government are considering the Select Committee report on the matter and taking it very seriously.

Nurses' Work Load

Mr. Jim Marshall: To ask the Secretary of State for Health what recent discussions he has had with the British Medical Association about the work load of nurses. [18386]

The Secretary of State for Health (Mr. Stephen Dorrell): I have not recently met the BMA specifically on the subject of nurses' work load. I am, however, in frequent contact with the medical profession and we discuss a wide range of health issues.

Mr. Marshall: Does the Secretary of State accept that the new deal for junior hospital doctors can be


implemented only with the co-operation of the nursing profession as nurses must adapt their role and take on new responsibilities? Is it not unfair that nurses should be awarded a pay increase of only 2 per cent. whereas junior hospital doctors are to receive an increase of 4.3 to 5.8 per cent?

Mr. Dorrell: I certainly acknowledge that the implementation of the new deal has implications for the nursing work load as well as that of junior doctors. I might have hoped that, in mentioning the implementation of the new deal, the hon. Gentleman would have welcomed the 2,400 new doctor posts that were created under that programme. The hon. Gentleman referred to a 2 per cent. pay increase for nurses. As he knows, that is not the position. As the review body recommended, the Government accepted the proposition that nurses' pay should be negotiated locally, subject to a floor of 2 per cent.

Mrs. Roe: Is my right hon. Friend aware of the warm welcome that will be given to the steps that the Government have taken to ease the work load of junior doctors? Will he confirm that there is now 99 per cent. compliance with the targets to reduce on-call contracted hours for junior doctors to 72 hours per week?

Madam Speaker: Order. The question relates to the work load of nurses.

Mrs. Roe: I beg your pardon, Madam Speaker. I thought that it related to work loads within hospitals—a matter that has been raised by the BMA. The hon. Member for Leicester, South (Mr. Marshall) referred to doctors in his supplementary question.

Mr. Dorrell: As I said to the hon. Member for Leicester, South (Mr. Marshall), the implementation of the new deal affects the work load of nurses. My hon. Friend is right to say that the new deal for junior doctors has led to a dramatic reduction in the absurdly extended hours that junior doctors used to work. The review body on nurses also reported:
The allocation of resources for the NHS for 1996–97 means that most providers should be able to reward staff for improvements in efficiency and effectiveness while delivering increased volume of quality of care to patients."

The review body regarded that as a "win-win" outcome for the NHS.

Mr. Battle: Is the Secretary of State aware that the hospital trusts in Leeds have sent all nurses a letter saying that, from 1 April, they will be covered by new and independent bodies and that their terms and conditions could change? Will it not be the case that in future nurses will be held in reserve and hired and fired on zero-hour contracts that will undermine the profession as young potential nurses will not want to join a profession that has no apparent career structure?

Mr. Dorrell: No. The hon. Gentleman is wrong on virtually every count. By agreement with the unions, new nurses joining the NHS are being recruited on local contracts. The holders of existing national contracts continue to benefit from the terms of those national contracts and the trusts continue to be bound by them.

Mr. Nicholas Winterton: Does my right hon. Friend accept that we have the best and most professional nurses

in the world in our national health service and that we have recognised the special work that they do by the independent pay review body, although there is now an element of local pay bargaining? Does my right hon. Friend accept that there is some concern that, because of the pressure under which nurses are now obliged to work, some people believe that we are taking the care out of nursing and that only the treatment matters when, in a vocational profession such as nursing, care is equally as important as the treatment?

Mr. Dorrell: My hon. Friend is right to say that we are blessed in the health service with an immensely dedicated nursing work force, among other professions in the service, and to stress the broader aspects of care for which nurses are famed and their contribution respected. I am sure that my hon. Friend will welcome the fact that, since 1979, at a time when earnings in the rest of the economy have risen 36 per cent. in real terms, the Government have seen nurses' earnings rise by a total of 70 per cent. over the same period. That shows the value that we attach to the nursing profession.

Ms Harman: Will the Secretary of State stop being complacent and admit that the British Medical Association is concerned, as we are, about the effect on patients of a shortage of nurses and doctors in accident and emergency departments? Does the right hon. Gentleman agree that there are in most A and E departments shortages of specialist nurses, junior doctors, middle-grade doctors and even consultants? What action does the Secretary of State plan?

Mr. Dorrell: The hon. Lady is still playing the record that she played before Christmas, and she has been proven wrong by events. Before Christmas, the hon. Lady said that we would run into a shortage of junior doctors in A and E departments. I told the House last week that we conducted an audit on the subject a few weeks ago and found that 5 per cent. of junior doctor posts in A and E departments were vacant. The hon. Lady was wrong before Christmas and she remains wrong now.

Health Care

Dr. Goodson-Wickes: To ask the Secretary of State for Health what consultations he has had over the future of the independent sector hospitals in the provision of health care. [18387]

The Minister for Health (Mr. Gerald Malone): I have met representatives from the Independent Healthcare Association and individual independent health care companies from time to time, to discuss issues of concern to the independent sector.

Dr. Goodson-Wickes: My hon. Friend may know that the third largest independent hospital in this country is Benenden hospital in Kent, originally founded for postal workers and their families. Despite the fact that Unison has questioned whether that represents a two-tier system, will my hon. Friend assure the House that he has no intention of denying choice and diversity to trade union and Labour party members who continue to use that excellent hospital for health care outside the national health service?

Mr. Malone: It is rather good to see the words of partnership in the bible that was published 10 days ago


by the hon. Member for Hartlepool (Mr. Mandelson) being put into practice by some Labour party members. That particular aspect of the mixed economy in health care is welcome, and I am sure that it will endure.

Mrs. Anne Campbell: Will the Minister confirm that NHS hospitals have been asked to reduce waiting lists in the period leading to the next general election to 12 months wherever possible and that, as a result, Addenbrookes hospital in Cambridge has been contracting patients into private hospitals, including the BUPA hospital in Norwich? Why cannot the NHS provide for NHS patients?

Mr. Malone: I find it extraordinary that the hon. Lady attacks us for reducing NHS waiting lists. I understood that it has been accepted by the Labour party that we have partnership in health care. If the hon. Lady is suggesting that where value for money and effective treatment can be obtained in the private sector, that should be denied to patients, I hope she will explain why to her constituents, who would be denied the sort of health care that they are now receiving if the hon. Lady were ever to get into office.

Coronary Heart Disease

Mr. Simon Coombs: To ask the Secretary of State for Health what progress has been made in reducing the incidence of coronary heart disease in England in the last 10 years; and if he will make a statement. [18388]

Mr. Horam: I am pleased to report that the trend in coronary heart disease is in the right direction. Mortality rates for CHD in people under 65 fell by 25 per cent. between 1987 and 1992. Since "The Health of the Nation" report in 1992, the trend has continued with falls of 10.7 per cent. in CHD mortality for under 65s and 7.7 per cent. for the 65 to 74 age group between 1993 and 1994. Progress, therefore, is very encouraging.

Mr. Coombs: The figures that my hon. Friend has given to the House are extremely encouraging, but can he confirm that there are still 140,000 deaths from coronary heart disease every year? Given that fact, how can the Government build on the success so far of "The Health of the Nation" strategy to convince that proportion of the population that continues to believe that it is immortal that that is not the case, and that sensible diet and exercise are worth while?

Mr. Horam: My hon. Friend is right. Coronary heart disease is still the major killer and my advice to everyone is to take more regular physical exercise. The House is not setting a good example. You will be aware, Madam Speaker, of the excellent facilities in the Boothroyd studio over the road in the Westminster gym. It is not well used by Members of Parliament and I say to everybody, "Get physical, release your endorphins and feel the stimulus of exercise. Look after your heart and your heart will look after you."

Mr. Kevin Hughes: What has the Minister to say about a recent Audit Commission report which says that access to coronary bypass operations depends on where one happens to live?

Mr. Horam: That is not the case. I have seen the report in question, but I shall certainly look at it again. If that is the hon. Gentleman's impression of the report, it is contrary to mine.

Mr. Jacques Arnold: While it is true that moderate exercise is very good for the health and for the prevention of coronary disease, does my hon. Friend believe that it is reasonable to ask young people to bicycle nine miles to school every day, perhaps to a school in my hon. Friend's constituency? Is it reasonable for parents to ask children to travel those nine miles?

Mr. Horam: My hon. Friend has a very real point.

Mr. McLeish: I am sure the Minister will acknowledge that, after the next election, Conservative Members will have more time to do any exercise that they choose. Will the Minister accept that, as 18,000 people die of coronary heart disease every year, we should be making a bigger effort to reduce those figures by more preventative measures and more treatment? Will the Minister also accept that a recently published report by the House of Commons Library shows that 40 per cent. of the district health authorities in England will not make the reduced target of 40 per cent. by 2000? Is not it a disgrace that people on waiting lists are dying because they cannot have access to a bypass operation? When will the Government stop being complacent and introduce policies that will address the real issues in the national health service?

Mr. Horam: If that is the case, I hope that I can count on the partnership of the hon. Gentleman in our Health Education Authority campaign, "Active for Life", which starts next week. I hope that the hon. Gentleman will join me to promote good habits.

"The Health of the Nation"

Mr. Robathan: To ask the Secretary of State for Health what progress has been made on the targets set in "The Health of the Nation" in respect of encouraging (a) exercise and (b) a healthy life style. [18389]

Mr. Bowis: Good progress has been made on both.

Mr. Robathan: "The Health of the Nation" report rightly stresses the importance of physical activity and exercise—to follow on from the last question. Will my hon. Friend speak to his colleagues at the Departments of Transport, of the Environment, and for Education and Employment and ask them to encourage people to walk and to bicycle rather than to use private cars? Will my hon. Friend note especially that only 2 per cent. of schoolchildren in the constituency of my hon. Friend the Member for Gravesham (Mr. Arnold), as elsewhere, now bicycle to school, whereas a huge number travel by private car? Does my hon. Friend believe that the House could set a better example and can he think of anybody who could set a better example in physical exercise?

Mr. Bowis: I cannot think what my hon. Friend means. The basic thrust of his energetic question is right. Moderate exercise is what is required, and a modest increase in the level of exercise taken by all of us would be beneficial. School sports certainly have a part to play—


which is why it is such a pity that, not so many years ago, Labour authorities such as the Inner London education authority banned competitive sports.

Mr. Simon Hughes: In "The Health of the Nation", published in 1992, the Government set a target for reducing smoking by 11 to 15-year-olds by 33 per cent. within two years—by 1994. In fact, over that period smoking in that age group that rose by 20 per cent, according to a survey at the end of last year—especially among girls. When will the Government follow the advice of the chief medical officer and support a ban on tobacco advertising? When will they support the Bill which hon. Members on both sides of the House, including me, are promoting to discourage youngsters from smoking? Without that, youngsters will keep smoking throughout adult life and kill themselves much earlier.

Mr. Bowis: It is certainly true that not smoking is part of a healthy life style, but the hon. Gentleman is not quite right about 11 to 15-year-olds. Over the 10 years to 1994, there was a slight decrease in smoking among young boys, while the figure for young girls remained steady. That is not good enough; I want to reduce the numbers.
All the evidence shows that it is not advertising, but price and parental example, that has an impact. On that basis, we are setting an example that the rest of Europe should follow.

Mr. Garnier: With regard to the target set in "The Health of the Nation", will my hon. Friend encourage and commend the work of district nurses, community health nurses and school nurses, especially those employed by the Fosse health trust in Leicestershire, who have done a tremendous amount of work to encourage all sections of the community, from schoolchildren to elderly people, to take moderate, healthy exercise so as to fulfil the targets to which my hon. Friend the Member for Blaby (Mr. Robathan) referred?

Mr. Bowis: My hon. and learned Friend is right. We seek not a maoist regime of collective physical jerks but an informed society of people with the facts about exercise and life styles, who can then decide for themselves and their families what to do. There is clear evidence, as my hon. and learned Friend rightly says, that the nursing community plays its part in this. If we can get across the message about moderate exercise, moderate drinking, knowing how to cope with stress, and cutting out tobacco and drugs, we shall end up with a healthier nation that will meet "The Health of the Nation" targets.

Mr. Barron: The targets for smoking among 11 to 15-year-olds set by "The Health of the Nation" were for a total of 6 per cent., but the figure is currently double that, so the Government are clearly failing to dissuade teenagers from starting to smoke. On the eve of national no-smoking day, what further action do the Government propose to take, given that they are clearly failing our young people?

Mr. Bowis: The hon. Gentleman is right to refer to national no-smoking day, which we confidently expect to lead to another 40,000 people giving up. He will also want to welcome the work being done in the campaign to persuade people to stop smoking, or not to start it, and in

the three-year campaign, about to start in April, aimed at young people. The Government, the health service and the nation make tremendous efforts to persuade young people to understand the facts about smoking; and we reinforce that with a price mechanism which results in part from the Chancellor's commitment to an annual 3 per cent. real terms increase in tobacco prices. Price and example are the ways to stop young people smoking and persuade them not to start.

Mr. Neil Hamilton: Is my hon. Friend aware that the oldest person in the world, Jeanne Calment, recently celebrated her 121st birthday and reportedly gave up smoking at the age of 117? Does he think that there are lessons in that for a healthy life style? If so, what are they?

Mr. Bowis: I suspect that the message is to give up smoking at least four years before becoming the oldest person in the world.

District Health Authorities

Mr. Spearing: To ask the Secretary of State for Health what adjustments he plans to make in the basis of the capitation formula for funding district health authorities. [18392]

Mr. Horam: The weighted capitation formula is kept under constant review, and a number of refinements are planned over the next few years.

Mr. Spearing: Does the Minister agree that, even with the York refinements, the present formula is unsatisfactory, as shown by the fact that, until recently, a psychiatric consultant in Newham was dealing with a case load that was double the national average? Does the Minister agree that the 12 per cent. that is allocated to psychiatric care is unrealistic and that the 24 per cent. allocated to community care is inadequate? Should not whatever cake that is provided by the Treasury be divided equitably and be seen to have been so?

Mr. Horam: I entirely accept the hon. Gentleman's point, but we are refining the formula continually. On his point about psychiatric care, we are developing the index for community health services. It may not quite be ready for the next allocation, but none the less work is being done on it, which, I am sure, will benefit his area.

Dame Elaine Kellett-Bowman: Does my hon. Friend agree that the Prime Minister's efforts to persuade public bodies and others to use the funding with which they are provided to pay the bills of those who supply the NHS will be welcomed by those suppliers? Does my hon. Friend recall that, in 1975, under a Labour Government, when inflation was running at 27 per cent., there was no inducement to pay bills promptly, and hospital treasurers referred to 31 March as the longest day in the year, because they did not close their books on 31 March, and did not pay their bills until the end of April?

Mr. Horam: I entirely agree with my hon. Friend. I certainly agree that the Prime Minister's initiative yesterday to publish a list of shame of Departments and


the way in which they dealt with small companies is appropriate. I hope that the Department of Health will not come at the bottom of that list.

Private Finance Initiative

Mr. Wigley: To ask the Secretary of State for Health how many projects for health facilities in England are currently subject to consideration under the private finance initiative. [18393]

Mr. Dorrell: All capital investment proposals in the national health service are considered for suitability for private finance as part of the capital planning process.

Mr. Wigley: Will the Secretary of State accept that some projects and locations are singularly inappropriate for private finance? Will he give the House an assurance that the Government will not impose private finance criteria on inappropriate projects, thereby delaying them for long periods when they could have made rapid progress?

Mr. Dorrell: I acknowledge that there are schemes for which public capital continues to be necessary. That is why there is still a huge public capital investment programme in the NHS. I also believe it true that the private finance initiative offers us the best opportunity that we have had in the history of the NHS to bring the facilities of the health service up to date and to give the best possible opportunity to the professions working in it to use modern technology and modern facilities to deliver the best health care to our patients.

Dame Jill Knight: Does my right hon. Friend agree that the PFI is one of the great NHS successes? Bearing in mind its success, would he like to open a book as to when the hon. Member for Peckham (Ms Harman) might decide on this one to change tack again, to follow her leader and to back the PFI?

Mr. Dorrell: I entirely agree with my hon. Friend's assertion that the PFI is an exciting thing happening in the health service.

Ms Harman: Nothing has happened.

Mr. Dorrell: The hon. Lady might like to take into account the fact that, over the past 10 years, despite the fact that the capital programme has been much bigger than it ever was under the previous Government, more than 10 projects—costing more than £25 million—have been given the go-ahead. That is 10 projects in 10 years. I have given the go-ahead to two more projects over the past three months. The hon. Lady knows that another 23 such projects are currently being assessed in the NHS. She seems to think it surprising that a project for which we announced a go-ahead in principle three months ago, costing £40 million, has not yet been signed in every particular. She is virtually unique in thinking that.

Mrs. Mahon: The Secretary of State will be aware that the tenders have gone out for the building of the new Halifax general hospital, and Tarmac, Mediclean or another company will presumably get the contract. Will he, first, give us his definition of clinical services and,

secondly, give the people of Halifax a guarantee that their clinical services will not be put out to tender or run by such private companies?

Mr. Dorrell: I have given the assurance many times that I shall not approve private finance projects, the viability of which depend on clinical or clinical support services being delivered by the private contractor, unless there is clinical support locally for that particular scenario. That has been the position in the health service for many years now and I do not propose to change it.

Mr. Gallie: Is my right hon. Friend aware that my constituents can now use a magnetic resonance imaging facility in the South Ayrshire Hospitals NHS trust? It used a modified PFI, setting up a non-profit-making private company to provide that facility. Is that not tremendous news and a great example to every trust throughout the country?

Mr. Dorrell: My hon. Friend is absolutely right. What he recounts is good news for his constituents and it is good news for every citizen of the United Kingdom because it shows the way by which we will be able progressively to improve the capital stock of the NHS. My hon. Friend is a trail-blazer. My hon. Friends will all want to follow where he has led.

Prescription Charges

Mr. Tony Banks: To ask the Secretary of State for Health how many increases there have been in prescription charges since 1979. [18394]

Mr. Malone: Sixteen.

Mr. Banks: If I had not heard that answer of 16 prescription increases from the lips of a Minister of the Crown, I simply would not have believed it. Does the Minister recall that in 1979 the prescription charge was 20p and, if that had been raised in line with inflation, it would still have been only 51p today instead of £5.50? Is it not also a fact that most of the commonly prescribed drugs cost less than the prescription charge? Prescription charges are a rip-off and, what is more, they are an inefficient rip-off. What miserable, pathetic, cringing excuse has the Minister to offer?

Mr. Malone: I am sorry to disappoint the hon. Gentleman, but I have a few facts which might put what he has been saying in perspective. First, I hope that he understands that prescription charges will contribute £310 million next year to health care. How, if the hon. Gentleman were choosing to modify that policy, would he replace those funds? I hope that he also understands that the average cost of a prescribed item is £9.30, so the prescription charge is two thirds the average cost of the prescribed item. Those are important contributions to NHS health care. I should have thought that the hon. Gentleman might well welcome them.

Mr. Booth: While my hon. Friend is asked to take tablets of scorn from Opposition Members, will he accept


a dose of pride from Conservative Members? What other country in the world has 80 per cent. of all its prescription charges, regardless of cost, completely free to patients?

Mr. Malone: My hon. Friend is right to remind the House of that fact, but that is last year's figure. I am pleased to tell him that, according to next year's estimates, that figure will increase to 85 per cent.

Mr. Ashton: Where did the Minister get that figure of £9 from? Has he taken the highest prescription cost and the lowest to get that average, or has he taken the average of the pyramid of all drugs?

Mr. Malone: The figure of £9.30 is an average of all items that are prescribed. I am delighted to confirm that the charge still represents good value for money for what those who make the contribution to the NHS pay. If it is put in perspective, it will be seen by the country to be very good value indeed.

Mr. Devlin: Will my hon. Friend remind us who introduced prescription charges and who, after abolishing them briefly, reintroduced them at a higher rate? Will he also tell us by how much prescription charges are likely to fall under a Labour Government after a careful examination of the policy documents put out by the Labour party?

Mr. Malone: On the second point, my hon. Friend will get absolutely no answer from the Opposition. He is right: he need look no further than the Opposition to find the answers to his first two questions.

Young Girls (Smokers)

Ms Lynne: To ask the Secretary of State for Health what estimate he has made of the proportion of 15-year-old girls who smoke regularly. [18395]

Mr. Bowls: The survey conducted by the Office of Population Censuses and Surveys showed that, in 1994, 30 per cent. of 15-year-old girls reported that they smoked at least one cigarette a week.

Ms Lynne: One of the Government's reasons for not banning tobacco advertising is that it has little effect on young people taking up smoking, so why are the Government spending £800,000 on advertising smoking's dangers to teenagers? I know that that is a small amount of money, but if it has no effect, why bother to spend it?

Mr. Bowis: We do not say that advertising has no effect, which is why we have gone to great lengths to reach a voluntary agreement with the tobacco industry. That agreement has successfully reduced advertising at places where young people are. There has been a 70 per cent. cut in poster advertising. We have cut shop-front and bus advertising. There are controls on advertising within 200 m of a school and close to playgrounds. Price and example are the two key ways to stop young people smoking. The hon. Lady should recall that in Spain, where smoking is a major problem, the price of cigarettes is

56p a pack, but in this country it is £2.74 a pack. Since 1990, consumption of cigarettes here has decreased by 15 billion cigarettes a year. That is the way to success.

Mr. Sims: It is of course right for Ministers to encourage a healthy life style, as my hon. Friends have been doing this afternoon, but is it not also their duty to discourage people, especially young people, from smoking? My hon. Friend has enumerated a number of factors, but there is ample evidence that advertising is also a factor. Why do the Government resolutely set their face against the advice that they have received to impose a ban on tobacco product advertising?

Mr. Bowis: My hon. Friend is right in saying that we must go on seeking to influence young people, but the evidence that we have received is that a total ban on advertising would not be effective. The voluntary 'route that we and the Netherlands have followed is effective. We have had clear evidence that we need to go on educating young people about tobacco, keeping the price up, and encouraging parents and others to stop smoking, because smoking parents often lead to smoking children. That is the purpose of our campaigns, which have led to decreases in the number of people who smoke. Whereas in 1974, 45 per cent. of people smoked, in 1992 that figure had fallen to 28 per cent.

Mr. Miller: If the Minister is serious about this, why is it that prescription charges, for medicines that people need, have gone up faster than cigarette prices, for drugs that people do not need?

Mr. Bowis: That is a totally different question. We have one question about people who can afford to pay contributing to the cost of their medication—with, as we have heard, a colossal exemption in this country for people who cannot afford to—and another about ways of encouraging people not to smoke because it can harm their health. The price of cigarettes and the example set by parents, older brothers and sisters and other role models are crucial in winning that battle.

GP Fundholding (Lichfield)

Mr. Fabricant: To ask the Secretary of State for Health if he will make a statement concerning general practitioner fundholding in Lichfield. [18396]

Mr. Malone: Fundholding has brought considerable benefits to the people of Lichfield—not least improved physiotherapy and day care services at Victoria hospital. I expect all general practitioners in Lichfield to be fundholding from April.

Mr. Fabricant: Does my hon. Friend recall the prophetic words of the hon. Member for Peckham (Ms Harman) when she said that general practitioners do not support the concept of fundholding? Does not the fact that, by April, every GP in Lichfield will be a fundholder show that she was just a false prophet?

Mr. Malone: The hon. Lady wishes to abolish fundholding not only for everyone in Lichfield who will be served by it from April but for everyone else.


The example in Lichfield is being followed in the rest of the country. From April, fundholding will cover more than 50 per cent. of England's population.

Medical Research Grants

Mr. Booth: To ask the Secretary of State for Health what funds his Department grants to medical research. [18398]

Mr. Dorrell: Expenditure from my Department's budget devoted to research and development in 1995–96 is expected to total £454 million. As well as the centrally funded programmes of research, that includes NHS expenditure on research and research-related activities. We are currently implementing the recommendations of the Culyer report, which are designed to strengthen our commitment to research and development.

Mr. Booth: When will my right hon. Friend and the Government spend much more on the hundreds of thousands of children who suffer from autism? Does not that subject need more Government funds?

Mr. Dorrell: My hon. Friend is right to point to the importance of research and development to the future of mental health services. It is for exactly that reason that the directorate of research and development has said that it intends to use its increasing budget to commit extra resources to research and development in the broader field of mental health.

PRIME MINISTER

Deregulation

Mr. Steen: To ask the Prime Minister if he will establish a league table of deregulation initiatives from each Government Department. [18414]

The Prime Minister (Mr. John Major): I am sure that my hon. Friend will welcome the further measures that I announced yesterday on simplified tax registration, new rights for business against enforcement action and simplified planning and development controls. I have arranged for a copy of details of the number of regulations repealed or amended by each Department to be placed in the Library.

Mr. Steen: I understand my right hon. Friend's reluctance to cover the walls of No. 10 Downing street with deregulation league tables. If he did so, however, it would highlight the difference between his approach to small firms and that of the Opposition, which will certainly increase the number of rules and regulations emanating not only from this country but from Europe. Will my right hon. Friend boost his own excellent approach by promoting Ministers—and, indeed, Back Benchers—who have good ideas on deregulation, and demoting those who have not? Perhaps he will have a word with the Leader of the Opposition, suggesting that he take similar action with his Front Benchers.

The Prime Minister: My hon. Friend is right about the importance of deregulation. We have undertaken

comprehensive consultation with small businesses, and, as a result of what they had to say to us, we have set out a comprehensive range of action which will, I believe, have been welcomed across the small business sector. I very much regret the necessity to place extra burdens on business sometimes, but we are utterly resolute in not accepting burdens such as the social chapter which would undoubtedly make the country inefficient and cost us jobs. Small firms are the life-blood of the economy, and they deserve our support.

Engagements

Mr. Roy Hughes: To ask the Prime Minister if he will list his official engagements for Tuesday 12 March. [18415]

The Prime Minister: This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

Mr. Hughes: Does the Prime Minister recall that last Thursday he gave the House the clear impression that the Government had no intention of taking away the employment protection rights of 10 million workers in private businesses? The very same day, he was contradicted by the Deputy Prime Minister. Who really speaks for the Government, and what is the true position?

The Prime Minister: In no sense did my right hon. Friend the Deputy Prime Minister contradict what I said yesterday. [Interruption.] I am sorry, Madam Speaker, but noise from the Opposition does not make them right; they are just as wrong whether they are noisy or silent.
I made it clear that I had no intention of announcing those changes yesterday; nor did I. I also made it clear that we intended to look at unnecessary regulations across the board: I made that clear to the House. Nothing is automatically exempt, but, having been examined, nothing will automatically be changed unless the examination suggests that that is worth while.

Sir Terence Higgins: As the referendum is an alien concept inconsistent with our system of representative parliamentary democracy, would it not be a mistake to change the Government's policy on the issue? On a single currency referendum, does my right hon. Friend agree that a single currency, in the sense that every member of the European Union gives up its own currency in favour of it, is not likely to happen before the next general election, the one after or the one after that and that a referendum on a core currency, which would split the Union, is even less likely to produce a sensible result?

The Prime Minister: As I have said to the House before, let me say again to my right hon. Friend that there are circumstances in which we think that it might be appropriate to have a referendum on the particular matter of whether this country should decide to join a single currency, were one to go ahead in 1999. I have made that point to the House before; that is a matter under consideration and it remains so.

Mr. Blair: Does the Prime Minister recall that he used to be flatly against a referendum on a single currency and then—

Mr. Ashby: Tell us your policies.

Madam Speaker: Order. Mr. Ashby, you are not at a football match now.

Mr. Blair: And then the Prime Minister's position changed to say that the question of whether to have a referendum would not arise until after a British Cabinet had recommended joining a single currency. That was the position reiterated a few days ago by the Chancellor of the Exchequer: it would be postponed until the decision about the single currency. Is that still the Government's position?

The Prime Minister: If the right hon. Gentleman wishes to swap quotes on these matters—[HON. MEMBERS: "Answer."] If the House is patient, I will come directly to the right hon. Gentleman's point, but I remind him, on the subject of consistency, that he once said:
we'll negotiate a withdrawal from the EEC".
To be strictly fair, he did subsequently say that he
wasn't actually opposed to membership of the EC … I said at the election, within the closed doors of the Labour Party, that I disagreed with that policy on Europe.
The right hon. Gentleman did not of course say that publicly, which one might have expected from such an ambitious Member.
I have often said before that, although I do not in general favour referendums in our parliamentary democracy, there are circumstances in which one might be appropriate. One of those circumstances is were the Cabinet to make a decision to join a single currency. I have made that clear; that is still the case. We are examining at the moment what the appropriate circumstances might be. When we have completed that examination, I will ensure that the right hon. Gentleman is among the first few hundred people to know.

Mr. Blair: The right hon. Gentleman did not actually tell us whether the Chancellor's position remains the position of the Government. Can I put this question to him? Is it still his view that collective responsibility during the course of such a referendum would still apply?

The Prime Minister: The fact is, on the first point, that my right hon. and learned Friend the Chancellor was with me and agreed in Cabinet to the examination that we are undertaking. The examination that we are undertaking covers not only the point that the right hon. Gentleman raised but a series of other important points that would need to be clear were such a decision to be taken.

Mr. Blair: So everything is up for review. The right hon. Gentleman used to be flatly against a referendum; now he cannot say. He used to be in favour of collective responsibility; now he cannot say. Is it not the truth that on this issue—[Interruption.] They do not like it, Madam Speaker. The right hon. Gentleman now cannot say on either issue. Is it not the truth that, on this issue, as in so many other areas, he is no longer able to be a

Prime Minister taking these decisions in the interests of the country but is simply a full-time party manager trying to manage irreconcilable factions in his own party?

The Prime Minister: One of these days, the right hon. Gentleman will learn to quit when he is losing. [Interruption.] He just made it perfectly clear that he has no interest in collective responsibility, no interest in Cabinet government and no interest in the Cabinet discussing these matters—which is precisely what his Back Benchers say about the way in which he determines his own policies. When he has had a little more experience, he will realise that that will never work in government.

Mr. Churchill: Is it not fantastic that the European Court, the European Commission and the leader of the Labour party should be so hellbent on pricing British and European workers out of jobs and exporting those jobs to the Pacific rim? If people in this country choose, of their own volition, to work 48 hours or more a week, why on earth should not they be allowed to do so?

The Prime Minister: I entirely agree with my hon. Friend. I strongly disagree with the ruling of the Advocate General this morning. We have one of the best records on health and safety at work across Europe. I do not believe that the working time directive can make any significant contribution to health and safety. We shall continue to argue the case that these matters are best agreed between employers and employees in the light of their own circumstances.
European legislation such as the working time directive is ludicrous, and we will continue to tell our partners in Europe that that is so. It is precisely because of legislation like that and stupidities like that, that the European Union is becoming uncompetitive and losing jobs to other parts of the world. It is complete nonsense and it is time that people began to stand up and say so.

Mr. Ashdown: So why did not the Prime Minister and the Government vote against the directive in the Council of Ministers? As the Prime Minister is in the business of swapping quotes, I shall remind him of two. In June 1992 he said to me, "I am not in favour of referendums and I will not put one before the British people." Last week he said, "I have never changed my view—it remains that a referendum might be the course of action to take."
Is it not perfectly clear that the right hon. Gentleman is not the leader of his party, but the prisoner of his party? How long will it now take for him to join us in saying that, when it comes to deciding Britain's future in Europe, Britain's people have a right to a say?

The Prime Minister: The right hon. Gentleman will know that his hon. Friend the Member for Ross, Cromarty and Skye (Mr. Kennedy) has in the past admitted the differences in their party on the question of a referendum. He knows that there are sharp differences. The right hon. Gentleman has said that he favours a referendum on this issue. He should not be so uncharacteristically modest—has it not occurred to him that his splendid advocacy might just possibly change my hon. Friends' minds?

Mr. Hayes: If my right hon. Friend has the good fortune to bump into Sir James Goldsmith, will he remind


him that, although he might think that wealth can buy privilege, it does not buy Members of Parliament and it does not buy Governments?

The Prime Minister: The only things for sale in this House are Labour party policies to the trade unions. [Interruption.] The deputy leader of the Labour party, the right hon. Member for Kingston upon Hull, East (Mr. Prescott), says, "Change the computer." We would like him to change the fact that half the Labour party's policies are determined by the trade unions, that most of its money comes from the trade unions, that it is the handmaiden of the trade unions and that it has no independence. The trade unions pay for the Labour party and they own it—it was that way, it is that way and it always will be that way.

Mr. Wareing: To ask the Prime Minister if he will list his official engagements for Tuesday 12 March. [18416]

The Prime Minister: I refer the hon. Gentleman to the answer that I gave some moments ago.

Mr. Wareing: Does the Prime Minister remember saying in April 1992, "Vote Conservative on Thursday and the recovery will continue on Friday"? When he

became Prime Minister, the unemployment figure was 1,754,811, but in January this year it was 2,224,207. They are his figures. What went wrong?

The Prime Minister: I shall tell the hon. Gentleman what has gone right with our economy, and he can then compare what has happened in this country with what has happened in other countries. If he is worrying about what has gone wrong, he should look at Liverpool council to get an indication. The leader of the Labour party said, I think, to The Spectator some time ago that one does not know the character of a party until it is in power. We have seen Labour in power in Liverpool council, and we know exactly the character of the Labour party.
I shall tell the hon. Gentleman what has happened in Britain. We have the lowest sustained rate of inflation for almost 50 years—it is below 3 per cent; we have the lowest mortgage rates for 30 years; we have an unemployment rate well below the European Union average; we have the lowest basic rate of tax for 50 years; we are the largest recipients of foreign investment outside Europe, into Europe and more than the rest of Europe added together; and we export more per person than any other country in Europe. In spite of the pantomime drivellings of the right hon. Member for Kingston upon Hull, East, that is what has happened in this country, and it is time that he woke up and saw it. It surely would not have happened with any other Government.

Intergovernmental Conference (White Paper)

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind): With permission, Madam Speaker, I should like to make a statement on the forthcoming intergovernmental conference.
Britain has a vision of Europe that is reflected in the White Paper that we are publishing today, which is entitled "A Partnership of Nations". We want to see a Europe that respects cultural and political diversity; that does only those things at the European level that need to be done at that level; and that is outward-looking, free-trading, democratic and flexible—a partnership of nations working together to advance their national interests. The intergovernmental conference is, of course, only one means available to us through which we intend to realise our objectives. We shall continue to work tirelessly in all the other forums for the same goal.
Successive British Governments have seen the European Union as a means of safeguarding stability and creating prosperity in Europe. There have been frustrations and controversies, but, overall, the United Kingdom has greatly benefited from more than 20 years of membership.
The Government approach the launch of the intergovernmental conference in Turin on 29 March unambiguously committed to our membership of the European Union. We shall play a leading role in the Union as one of Europe's biggest and most powerful nations. Britain's voice is influential and it has helped shape the European Community in the past. Britain was the pioneer of the single market. We have been one of the leading advocates of enlargement and of a European Union open to the world. The Government believe that the European Union will succeed only if it respects the integrity of the independent democratic nation states that comprise its membership and if it is flexible enough to accommodate their political and cultural differences. The Government are totally opposed to a monolithic, centralised, federal Europe.
The treaty on European Union—like the original treaty of Rome—calls for an
ever closer union among the peoples of Europe"—
not, let it be noted, among the states of Europe or among their Governments. That aspiration for strengthened co-operation and friendship across the whole of Europe is a noble one, and is fully shared by the Government. However, it should not mean an ever closer political union in the sense of an inexorable drift of power towards supra-national institutions, the erosion of the powers of national Parliaments or the gradual development of a united states of Europe. The Government reject that conception of Europe's future. That is why it is crucial that national Parliaments remain the central focus of democratic legitimacy. Europe must develop with the instincts of free people in free nations. As the European Union matures, it needs a clearer sense of what it is and of what it should never aspire to be. Those principles are closely adhered to in the White Paper.
The intergovernmental conference is obviously important to the European Union's future, but it is not the only, or perhaps even the most important, challenge

confronting the Union. Outside the intergovernmental conference, we must prepare for the enlargement of the Union to the east and the south, which will involve the Herculean task of reforming the Community's agricultural and regional policies. Meanwhile, we cannot ignore the urgent need to strengthen Europe's competitiveness and thereby generate new jobs. There will also be hard choices to make on a single currency and on the Union's future financing. Those crucial matters do not fall within the scope of the intergovernmental conference, although the United Kingdom is developing clear and robust policies in each area.
The Maastricht treaty came into force little more than two years ago. We agree with the conclusion of the study group that was set up to prepare for the IGC that
the Conference should focus on necessary changes, without embarking on a complete revision of the Treaty".
British objectives, such as a major reform of the common agricultural policy, do not need treaty amendment and will be pursued in other negotiations.
The IGC has yet to begin. In common with other member states, the Government are still considering their detailed approach. We may have further proposals to make as the negotiations proceed. The following represent our specific proposals for this intergovernmental conference.
First is subsidiarity. That is the key to ensuring that the Union concentrates single-mindedly on doing what needs to be done at a European level, and only that. The United Kingdom introduced that vital concept into the treaty of Maastricht. The principle has been developed at subsequent European Councils. It is having the effect that we intended, but more clarity is needed in the treaty. We shall therefore make proposals at the intergovernmental conference to entrench subsidiarity still further in the treaty.
Secondly, we are concerned at the way in which certain directives have been used or may be used for purposes that were never intended by the Governments who agreed to them—for example, health and safety articles that may be used for social policy, or fiscal measures that may be added on to single market or environmental proposals. Another example is the common fisheries policy, where the practice of "quota hopping" is preventing fishing communities from enjoying a secure benefit from national quotas, thereby undermining their entire purpose. The Government do not believe that directives, once enacted, are irreversible, and will press for treaty amendment if that proves to be the best way of ensuring that the original purpose of those directives is fully respected.
Thirdly, the President of the Commission, Jacques Santer, has said that the Union should do "less but better". Britain agrees. The volume of new legislative proposals being put forward has been falling rapidly, with only 19 proposals for principal legislation expected in 1996 compared with 61 in 1990, but there is also an urgent need to improve the quality of European legislation, and we shall be pressing for a range of measures to achieve that, including much wider consultation of interested parties via the Commission before proposals are put forward, and the automatic withdrawal of proposals that are not adopted by the Council within a given time.
Fourthly, national Parliaments are the primary focus of democratic legitimacy in the Union. The House, like the Government, rightly attaches importance to the role of


national Parliaments in European Union decision making. We have taken careful note of views expressed in several helpful reports by Committees of the House.
We are examining a range of ideas, including a binding period for Parliaments to scrutinise Community documents before decisions are taken in the Council, and a greater role for national Parliaments in the justice and home affairs pillar.
The European Parliament, by contrast, already has a major role in the European legislative process, including a number of new powers acquired at Maastricht, some of which have yet to be fully tested. The Government do not, therefore, see the case for new powers for the European Parliament at the expense of national Parliaments or Governments.
Fifthly, we believe that foreign and defence policy must remain the responsibility of national Governments. The common foreign and security policy has, since its inception, achieved more than many had expected. It is in this country's national interest that members of the European Union should speak and act together on the world stage where our objectives are the same. Our joint support for the middle east peace process or for democratic institutions and market economies in central and eastern Europe is an obvious example. We shall be pressing for a more effective common foreign and security policy at the forthcoming conference. But, crucially, Britain believes that the common foreign and security policy must remain based on unanimity and be intergovernmental in character if it is to succeed. As the House knows, I put forward our ideas in a speech in Paris last week. Ultimately, the common foreign and security policy will carry weight internationally only if it represents a genuinely common policy, not a majority one.
Sixthly, the intergovernmental conference will also be considering the arrangements for European defence co-operation. The Government set out their approach in a full memorandum last year. That memorandum has been attached to the White Paper that is being issued today. We believe that it would be useful to improve defence co-operation in Europe by closer co-operation between the European Union and the Western European Union. We do not, however, believe in the integration of those two bodies or in the subordination of the WEU to the European Union. NATO must remain the bedrock of western security. The European Union, four of whose member states are neutrals, and which are neither in NATO nor in the WEU, cannot expect to take decisions on defence policy or on the use of military forces.
Seventhly, co-operation in justice and home affairs will be of particular importance in the intergovernmental conference, because terrorism, organised crime, illegal immigration and drug trafficking are among the greatest challenges facing modern society. They require a co-ordinated, multinational response. Substantial progress has been achieved in the past few years in that area, and Britain has proposals for improving that co-operation. But, as with foreign policy, the Government believe that those issues must remain intergovernmental and subject to unanimity if they are to carry the support of the peoples of Europe. Those are matters of high political sensitivity, involving questions of national sovereignty.
Eighthly, the European Court of Justice is another area in which we shall be pressing for improvements at the intergovernmental conference. Britain is committed to a

strong and independent Court, without which it would be impossible to ensure even application of Community law or to prevent abuse of power by the Community's institutions. But the functioning of the court can and, in the Government's view, must be improved. There is very great concern that the court's interpretations sometimes seem to go beyond what Governments intended when laws were framed.
The Government are working up a number of proposals to enable the court to address those concerns better. They include: strengthening the ability of the court to limit retrospective application of its judgments; introducing the principle that a member state should be liable for damages only in cases of serious and manifest breach of its obligations; applying national time limits to all cases based on European Community laws, except where the member state's failure to implement a directive is in serious and manifest breach of its obligations; an internal appeals procedure; streamlined procedures for the rapid amendment of European Community legislation that has been interpreted in a way that was never intended by the Council; an accelerated procedure for time-sensitive cases; and a treaty provision clarifying the application of subsidiarity in the interpretation of Community laws. The Government will shortly be issuing a memorandum setting out their proposals in detail.
Ninthly, certain changes to the Council voting system will be necessary if the Union is to continue to function democratically in an enlarged Union. At present, the system of weighted votes is biased against the larger member states. There is growing acceptance across Europe that a way must be found to address that imbalance. Possible alternatives include changing the number of votes of larger countries so that population is better reflected. What is clear is that the system must not allow countries representing a significant percentage of the European Union's population or the major net contributors as a group to be outvoted.
Tenthly, as the Union enlarges to as many as 27 members, it will be necessary to change the current policy whereby every member state, however small, has a Commissioner and is responsible for a six-month presidency. Such a structure would quickly become unworkable in an enlarged Union.
As the White Paper makes clear, there are a number of other specific areas where the Government see scope for improving the treaty at this intergovernmental conference. Those areas include animal welfare and possible changes to the common fisheries policy, as announced by my right hon. and learned Friend the Minister of Agriculture, Fisheries and Food last week. There are many areas where the countries of the Union could and should co-operate more closely in their own national interests, and in the interest of Europe as a whole. But at a time when there is concern about Europe trying to do too much, we do not believe that the rules on qualified majority voting in the treaty should be changed to make it easier to override national concerns in matters of particular sensitivity. That is why we shall oppose the extension of majority voting at the intergovernmental conference.
Nor do we favour further harmonisation or the extension of Community competence in the area of employment. The need to create jobs is one of the highest priorities facing the European Union. But jobs cannot be wished into being simply by legislating for them; it is


businesses that make jobs. That is why the Prime Minister negotiated Britain's social chapter opt-out at Maastricht—and our opt-out is here to stay.
The Government approach this intergovernmental conference with confidence and determination. This country's national interest is the starting point for our approach as, for all free nations, the national interest can be defined as the collective expression of the democratic process. In many spheres, our national interest coincides with that of our European partners and, in those spheres, working with our partners enables our collective effort better to achieve our ends. We shall argue constructively for treaty changes to improve the operation of the Union. We want to strengthen the treaty so that Europe can face and overcome the challenges ahead and, in particular, so that we can prepare for further enlargement.
As I have said, the conference is only one forum where we shall press for our vision of Europe. There are others and we shall argue robustly in all of them. Britain will be at the heart of the debate about the future of the European Union, because it is our future and we can best shape our national destiny by working with our closest neighbours to make a strong and effective partnership of nations.

Mr. Robin Cook: As Britain approaches the important intergovernmental conference, it is obviously in the national interest that we should, wherever possible, seek agreement on the agenda for that IGC. I therefore begin by welcoming the matters on which we agree with the Government's approach.
Does the Foreign Secretary accept that we endorse what he said about the justice and home affairs pillars and the common foreign and security policy? Both subjects should be dealt with by intergovernmental agreement rather than through participation of the European institutions. Does the Foreign Secretary agree that the common foreign and security policy must remain a common policy, not a majority foreign and security policy? Does he accept that he will have our full support in resisting any defence competence for the European Union, which is not where Britain should look for its security interests?
We support entirely what the Foreign Secretary said about the importance of subsidiarity in making Europe more accountable to the people, by bringing decisions closer to them. Our only regret is that the Government do not practise subsidiarity in Britain. Does the Foreign Secretary agree that if the Government are successful in winning back some powers from Brussels, they should not keep all those powers to themselves, but should decentralise some of them from Whitehall?
I entirely endorse what the Foreign Secretary said about the importance of the enlargement of the European Union. There can be no greater mission for western Europe than to open its doors to the new democracies of central and eastern Europe, and to support democracy in those countries as well as the stability of their borders. If, however, the Government's commitment to enlargement is to be taken seriously, the Foreign Secretary must answer the following question. Does he believe that the European Union can admit another 10 or 15 members, each clutching a veto over the full range of issues that are now settled by unanimous vote? Does he accept that he

has our full support in retaining a British veto on taxation, on changes to the treaty and on strategic political issues? Does he accept also that many people will consider the Government hypocritical when they discover that, after the Government presided over the massive extension of qualified majority voting and the Single European Act, opposition to qualified majority voting is now a guiding principle? Finally, I welcome most of all the positive tone of much of his statement.
The Foreign Secretary began by reminding the House that Britain had benefited greatly from 20 years' membership of the European Union. He ended by saying that we must work closely with our neighbours to ensure a strong and effective partnership. The Foreign Secretary's problem is that many of his hon. Friends do not agree with either statement. Is that not why neither his White Paper nor his statement has anything positive to offer on the three major issues facing Europe? Does he accept that Opposition Members believe that the top priority of European policy should be the provision of jobs?
Why then does the White Paper rule out the proposal before the IGC that the treaty should be amended to include employment as an objective of the European Union? The Government agreed at Maastricht to set targets on inflation, interest rates, fiscal deficits and national debt. Why can they not agree that a priority for the IGC should be to balance those monetary targets with a commitment to employment?
The Foreign Secretary said that the opt-out on the social chapter is "here to stay". Does he accept that the opt-out will go when this Government go? Does the Foreign Secretary not know that two thirds of the public want Britain to join the social chapter? Why should they not have a Government who speak for them at the IGC? Why should the workers of Britain be denied the same rights to information and consultation about the future of their country as those who work in Europe? The social chapter is a competitive issue: how do the Government, in the age of the knowledge industries, imagine that Britain can be competitive when the work force is kept in the dark?
The greatest omission from the Foreign Secretary's statement and from the White Paper was any contribution to the debate on the single currency. Does the Foreign Secretary not understand that no one will believe his claim that the White Paper does not discuss the single currency issue because it is not part of the IGC' s formal agenda? Everyone knows that the real reason why the White Paper does not mention the single currency is that Conservative Members cannot agree on what to say about it.
Does the Foreign Secretary agree with the views of his colleague the Chancellor of the Exchequer, who tells us that he is sympathetic to the single currency, or does he agree with the right hon. Member for Wokingham (Mr. Redwood), who tells us that the Conservatives would never give up the pound? The reality is that the Foreign Secretary dare not present a White Paper that tells us where the Government stand, because he knows that it would not be possible for both his colleagues to vote for it. Will he accept the simple, honest truth that no British Government can join a single currency without the consent of the British people?
The right hon. and learned Gentleman has produced a White Paper that tries to please everyone, but the result will please no one. The Government cannot make progress in Europe because they are paralysed by


divisions at home. Britain needs a Government who can provide a lead for Britain in the IGC on an agenda of reform for Europe. The Foreign Secretary's statement and his White Paper's silence about the great issues facing Europe have demonstrated why Britain cannot have such a Government until it gets a change of Government.

Mr. Rifkind: It is rather rich for the hon. Gentleman to remind me that some of my hon. Friends might not take the view that the European Union has been good for Britain, when he spent his first 20 years in the House and several general elections campaigning to take us out of the European Union. He went on to comment about jobs. The Labour party, as represented by the hon. Gentleman, invites derision by pontificating about the need to help employment in this country while simultaneously seeking to impose upon industry the social chapter, which, as the Labour deputy leader admitted, would destroy jobs in Britain.
The hon. Gentleman was careful not to point out that the Labour party is already committed to removing the British veto on social policy, regional policy, environmental policy and industrial policy. Its documents say explicitly that there would be no permanent opt-outs under a Labour Government. If that means anything, it means that a Labour Government would roll over and lie down whenever a majority wished to press for some other proposal. When the hon. Gentleman and his colleagues say that they would never be isolated in Europe, that appears to mean that they would rather be popular than right. As long as they take that position, their views on the European Union do not deserve the respect of the House or of the country.

Mr. Norman Lamont: May I welcome much of what is in the White Paper and what my right hon. and learned Friend said about qualified majority voting and about the European Parliament, if we have to have one? Is not the real test of what my right hon. and learned Friend has said whether, over the next few years, Britain can avoid being sucked into a European state of the kind that many of our partners want, as I discovered at the previous intergovernmental conference? Does he know of any organisation in history that had an elected Parliament, a supreme court, a passport, a right of citizenship and a single currency, but was not a state?

Mr. Rifkind: I entirely accept from my right hon. Friend that the European Union is unprecedented. It will be unprecedented whether it remains in its present form, as we would like, or whether other member states press for it to go further. It is already unique, even in its present form. I remind my right hon. Friend that any changes in the treaty require unanimity, and we have made it abundantly clear that we are not prepared to countenance moves towards the supra-national structure that remains the aspiration of some of our partners.
Increasingly, the peoples of Europe—if not yet their Governments—are moving in a similar direction. We saw the way in which French opinion expressed itself during the referendum in France two or three years ago. There are similar developments in other countries. There is a historic process at work and a great debate throughout Europe. That debate may be slightly more voluble here than in some other countries, but it is already happening in France, Germany and elsewhere. It is our historic role

to lead those who call for a Europe that is, as we have described it, a partnership of nations and not an incipient super-state. That will be our role and we shall continue to fight for that objective.

Mr. Charles Kennedy: Is not the Government's strategy—if it can be dignified by that term—towards the IGC in danger of imminent collapse under the weight of its own internal contradictions? How can the Government achieve a Europe that is closer to European citizens when, even now, they are denying the European Parliament—the one elected representative of European citizens—the right of access to and representation at the IGC?
How will the Foreign Secretary square what he described in his statement as the Herculean task of structural and institutional reform that will be occasioned by enlargement, with the fact that incoming states will carry vetos, but there will be no logical extension of qualified majority voting? They will be allowed a veto, but not always a Commissionership. That seems utterly illogical.

Mr. Rifkind: On the latter point, I do not think that anyone is seriously suggesting—unless the Liberals are—that, if we have 27 member states, we must have 27 Commissioners, regardless of whether there is any work for them to do. That would be a typical Liberal solution to such a problem.
On the earlier part of his question, I ask the hon. Gentleman to reflect on the wisdom of what he has just said. We oppose the European Parliament playing a negotiating role in the intergovernmental conference, because the IGC is exactly what the letters mean—it is an intergovernmental conference. The European Parliament has never had such a role in the past, and Britain and France strongly opposed such a suggestion when it was discussed in recent weeks. The French Government share our view that it would be totally unacceptable in an intergovernmental conference for the European Parliament, which is just one of several institutions, to acquire such a role. Why should it have powers that national Parliaments, which have at least as much claim to democratic legitimacy—some would say more—will not have in the IGC?

Mr. Ray Whitney: Does my right hon. and learned Friend recall that Chancellor Kohl, in his widely but partially reported speech at Louvain last month, said that no one wants a centralised super-state and that one does not and will not exist? Does my right hon. and learned Friend agree that that approach is entirely compatible with the Government's statement that they want a partnership of nations, which offers an encouraging way forward in developing a European Union that responds to the aspirations of this country and of our European partners?

Mr. Rifkind: My hon. Friend is right to remind the House of that welcome statement, which Chancellor Kohl has made on several occasions. We must examine particular proposals for changing the treaty or the institutions, as to whether they would move us in that direction. I entirely accept Chancellor Kohl's good faith in making that statement, and we welcome his repeated assertion of that view.

Mr. Peter Shore: The House will want to study carefully the White Paper, which


is important, but one's first impression is that its tone is right. I particularly welcome the emphasis on enlargement, subsidiarity, and the retention of powers by this Parliament and our own people. Following the remarks of my lion, Friend the Member for Livingston (Mr. Cook), I put it to the Secretary of State that the issue that worries the people of Europe more than any other, rising long-term unemployment, is not centrally on the IGC agenda. There is a connection between the level of unemployment and the existence of the commitment to economic and monetary union in the Maastricht treaty. It is precisely deflationary convergence factors that have driven unemployment up to 20 million. Surely that issue ought to be brought forward and put centrally on the IGC agenda.

Mr. Rifkind: I thank the right hon. Gentleman for his earlier comments, and I agree about the crucial importance of employment and jobs. The IGC is one of several, parallel negotiations that will be taking up the time of the European Union over the next two or three years. The IGC deals with specific treaty amendments and the powers of institutions. At the same time, negotiations will begin on enlargement, and there are the continuing questions of European monetary union and the EU's future financing.
Employment will be an important feature in all those negotiations. We do not believe that the IGC can itself make a significant contribution in that regard, because amending the treaty or the powers of institutions would not, in our view, make a significant contribution to real jobs. Perhaps it is no coincidence that the one major country in the European Union that has falling unemployment happens to be the one country—the United Kingdom—that has declined to introduce the social chapter. It is worth reflecting on that point.

Mr. John Redwood: Given that the European Court is demolishing our fishing industry and social chapter opt-out, will the Government consider stronger measures to assert the rights of this Parliament against the European Court, including modifying the 1972 legislation or asserting our parliamentary right to review European Court judgments—just as the German court does?

Mr. Rifkind: Of course, we are willing to consider any constructive proposal to ensure that the European Court does not frustrate the clear objectives of Governments when they introduce legislation. That has been one of the most worrying features of a number of judgments in the past few months. I do not pretend for a moment that the task is easy. One way of completing it, as I mentioned in my statement, is to seek to amend the treaty where appropriate.
Earlier, I said specifically that if health and safety legislation is, in our view, being misused to seek to impose the social chapter by the back door, and that requires a treaty amendment, we shall seek to achieve such an amendment in the intergovernmental conference. That applies in a number of other areas, including those that I mentioned. In addition, we must review the European Court's procedures, to limit wherever possible

the means by which it can advance objectives that are inconsistent with those of the Governments who negotiated particular policy proposals.

Mr. Andrew Faulds: In view of the centrality of the deliberations of national Governments, which the right hon. and learned Gentleman stressed, how can—will he listen to me—how can a British Cabinet even contemplate a referendum on anything?

Mr. Rifkind: I hear the hon. Gentleman's views, and they are not relevant to the statement that I made today. As he well knows, the question of a referendum is under consideration, and I cannot usefully add to what my right hon. Friend the Prime Minister said.

Sir Ivan Lawrence: Is my right hon. and learned Friend aware that, although there will be a wide welcome for his support of the centrality of the nation state, the fact remains that the European Court of Justice, with its present powers, can exist only to serve as an engine for a federated super-state? It will not be enough merely to contain the extension of those powers. If we are to maintain the supremacy and the centrality of the nation state, we shall have to reduce the powers that the European Court has given itself.

Mr. Rifkind: I agree with my hon. and learned Friend that a serious challenge has to be addressed. On the one hand, we need a European Court to ensure, for example, that the single market is properly observed. Many would like to avoid their responsibilities under the single market, if they felt that they could get away with it, and the European Court has been extremely useful in preventing that. The European Court has also been very effective in a number of its judgments. For example, it fined Italy for avoiding milk quotas. We have been happy to welcome a number of such judgments.
At the same time, I agree with my hon. and learned Friend that we do not want a European Court that sees its role as making law—rather than interpreting the law that Governments have agreed—or that inadvertently makes law. That is a difficult problem and I do not say that we have the absolute answer, but it is an increasing priority that must be addressed, not just by the United Kingdom, but by the Council of Ministers as a whole.

Mr. Tony Benn: Is the Foreign Secretary aware that—quite apart from the effect of the convergence criteria for a single currency, which would probably cost millions of jobs in the Union—the right to tax, to borrow and to spend belongs, in a democracy, to the people through their representatives in Parliament, and no Government—Conservative, Labour or any other—have any moral or legal authority to transfer that power to others who are not accountable to the British electorate? Therefore, were such a proposal to come forward, it would be an attempted coup d'état to try to carry that through without the explicit consent of the British people in a vote on that issue in a referendum. That is a question that cannot be avoided, however long it is before the single currency becomes the immediate issue.

Mr. Rifkind: I very much agree with the right hon. Gentleman that the right to tax is one of the fundamental powers of a democratic and sovereign Parliament, and that


is one of the reasons why any fiscal proposal must have unanimity under the current rules and why, as I commented earlier, we would be gravely concerned at any attempt to use single market directives as a means of indirectly implementing or proposing fiscal measures. If a treaty consideration is also required to prevent such an eventuality, we would not hesitate to argue powerfully for such a change.

Mr. William Cash: Does my right hon. and learned Friend accept that, whether one considers the question of Bosnia, the exchange rate mechanism, fishing, monetary union or a whole range of other matters, there is a clear sense in the electorates of Europe and the United Kingdom that the Maastricht treaty has failed the people of Europe? Does my right hon. and learned Friend also accept that the treaty amendments needed to make the changes to put that right, in the interests of Europe and the United Kingdom, require unanimity? How will he be able to achieve the objectives in the wish list that is set out in the White Paper except by renegotiating the Maastricht treaty?

Mr. Rifkind: The proposals in the White Paper do not in themselves require a renegotiation of the Maastricht treaty; but I accept that some of them will be controversial. We may start off with few allies at the conference as regards some of the proposals. That does not alarm or depress me. I recall that when the Government identified the need for a British budget rebate, we started without any allies, but after robust negotiations we got what we believed to be our right. So if the merits of the argument are powerful and convincing, in due course we shall prevail.

Mr. John Home Robertson: As the cost to the British economy of exchanges with mainland European currencies is now as great as, or even greater than, the cost of our contribution to the budget of the EU, has not the time come to give positive consideration to the case for a single European currency?

Mr. Rifkind: I hear what the hon. Gentleman says. We believe that the proper time to consider the question of a single currency is not in this Parliament. There is no possibility of that before 1999, and the Government's view on the matter has in any case been presented clearly on previous occasions.

Sir Dudley Smith: I agree with my right hon. and learned Friend that NATO is the bedrock of European security and defence. Given his welcome approach, does he agree that the future of the Western European Union is probably very good if it can at last become the proper pillar of NATO in the European context? Does he further agree that a takeover by the European Union, which he has resisted today, must be repelled at all costs?

Mr. Rifkind: I agree. I welcome my hon. Friend's support, particularly as he is fully involved in defence issues affecting the WEU. The crucial point is that co-operation between the WEU and the EU makes sense, but it must be co-operation, not subordination. The membership of the two bodies is different; they have

different treaty bases. It would be quite improper for the EU to aspire to a defence role—that is not its function, nor should it become so.

Mr. D. N. Campbell-Savours: Is it not true that, without the pressure of convergence, a number of our European partners would have found themselves in far greater financial trouble today—certainly on the inflation front?

Mr. Rifkind: If Governments choose to try to bring their inflation down—their public sector deficits down—that is highly desirable. If it happens throughout Europe in a rational and sensible way, the European economy can only benefit from that; but it must be done consistently with economic reality.

Mr. David Howell: Does my right hon. and learned Friend accept that his White Paper, which I know has not been easy to draft, sounds extremely positive? That seems to be recognised on both sides of the House, and it is welcome. Also welcome was his warning about the unending accumulation of powers by central authorities in the Union, and the need to hold them in check. But will he explain precisely how we shall put some substance into the drive for subsidiarity and the returning of powers to nation states? Has he seen a recent report that claims that, after two years of listing all the measures that ought to be returned to nation state level by subsidiarity, the only one that has in fact been returned is a directive on the management of zoos? That does not sound as if great progress has been made.

Mr. Rifkind: I thank my right hon. Friend for his welcoming opening remarks. The first step towards achieving what we all seek is to get entrenched in the treaty not only the principle of subsidiarity but, as we now propose, some of the detailed guidelines agreed at European summits. We know that whenever issues are in dispute, it is what is in the treaty that ultimately decides what the end product will be. So that is a high priority.
There has already been a welcome reduction in the number of new directives from Brussels, in part because of the completion of the single market process and in part because of the substantial difference in style of Mr. Santer, compared with the Commission headed by Jacques Delors. The trend in that respect is encouraging, but we have one heck of a long way to go. The more subsidiarity we can get entrenched in the treaty, the easier it will be to ensure that that is reflected in how the EU operates.

Mr. Dennis Skinner: Is not it time that some Minister or Opposition Front Bencher made it clear that political treaties do not last for ever, whether they are bilateral or multilateral? That will have to be faced at some time. We have had 23 years of this unmitigated disaster. We no longer use our own fishing fleets; the shipbuilding industry around Britain has been wrecked. Europeans never bought our coal and bought only very little of our steel. There are 20 million people out of work in Europe, and 4 million—the real figure—out of work here.
This has been a trail of disasters, and millions of people out there are longing for someone to admit that it has not worked. The halcyon days are over now. Neo-fascist parties are scattered all round Europe. Most Common


Market countries have different views on Bosnia, Croatia and the rest. It has to be admitted at some time. The emperor has no clothes, and all treaties eventually finish up in the political dustbin. That is where this will end.

Hon. Members: Answer.

Mr. Rifkind: I am interested in hearing these wise philosophical statements. I noticed that they were addressed to both Front Benches. I do not know whether I speak on behalf of the hon. Member for Livingston (Mr. Cook) in any response that I make, but I ask the hon. Member for Bolsover (Mr. Skinner) to ponder on one thing. If the European Union has been as unremittingly bad as he implies, it is interesting that countries continue to queue up to join. At the moment, 12 countries are anxious to join the European Union. [Interruption.] There may be a variety of motives, but nevertheless the hon. Gentleman perhaps slightly exaggerated his point.

Mr. Jonathan Aitken: May I welcome the parts of my right hon. and learned Friend's White Paper which, for the first time, seem to strike some good Euro-sceptic themes, such as the demands for new limits on Community action and new limits on the European Court of Justice, and, of course, the commitments to defend firmly our national opt-outs and our national veto? May I warn him, however, that if by any chance the important battles that he and his negotiating team will fight were to be lost or be surrendered by the revealingly new Europhile Labour Front Bench that we witnessed this afternoon, the House would, for the first time in many years, have to consider seriously the option of withdrawal?

Mr. Rifkind: I believe that an historic debate is taking place throughout Europe. I freely acknowledge that progress with the ideas that we represent is slow, but I believe that the partnership of nations that we envisage for the European Union goes with the grain not just of British opinion, but ultimately of that in other member states as well. I do not detect any enthusiasm in any country in Europe, outside, perhaps, certain elements of the political class, for some supra-national European nation state. I do not believe that there is any enthusiasm for that. If that is the case, given that these are all democratic nations, I believe that that will show itself in due course.

Mr. Donald Anderson: That is a pipe dream. Is not the reality that the Foreign Secretary has said that he will negotiate changes to the European Court of Justice? He has said that he will robustly ask for this and for that. He is on a loser. Look at the position taken by the French and German Governments. A simple question: what will he do when his position is rejected, as inevitably it will be?

Mr. Rifkind: The hon. Gentleman may be able to put such a remark to his hon. Friends on his own Front Bench, who are terrified of being isolated, who have said that there will be no permanent opt-outs, and who wish to give up our veto in areas where we currently have it, but he is not entitled to make such a remark to the Government,

who negotiated the British budget rebate, the opt-out from the social chapter, and the opt-out on the principle of a single currency. The hon. Gentleman should know that the Government's record in achieving targets that they set themselves has been exemplary.

Mr. John Butterfill: Does my right hon. and learned Friend agree that although it is necessary for us to support the enlargement of the Community, any such enlargement would involve as a prerequisite substantial and significant renegotiation of the finances of the Community and of the common agricultural policy? Does he further agree that there are some areas where the powers and resources of the Commission need to be increased, in particular the stamping out of fraud and the policing and elimination of illegal state subsidies?

Mr. Rifkind: Yes, that is indeed a high priority, and we have attached importance to improving the controls against fraud both in previous initiatives and in some of the ideas in the White Paper. I also agree with my hon. Friend that, as we move towards enlargement, that enlargement will render essential what the Government have long argued for—a major reform of the common agricultural policy in order to remove some of its more irrational features.

Mr. Ieuan Wyn Jones: Does the Foreign Secretary agree that the IGC will give the Government an opportunity to look again at their definition of the principle of subsidiarity? Does he accept that throughout most of Europe the principle of subsidiarity means that decisions are taken at three levels—the European level, the member state level and the national and regional level? Will he now answer the point put to him from the Labour Front Bench, that that should be the position adopted by the British Government at the IGC?

Mr. Rifkind: We believe very strongly in and have practised the policy of decentralising to individual people—giving people rights. The hon. Gentleman is obsessed by institutions and believes that freedom is extended when institutions are given powers. We believe that the best way of expanding liberty is to allow people to have greater control over their own lives.

Mr. Iain Mills: May I ask my right hon. and learned Friend two very quick questions? Will he clarify whether, as the White Paper suggests, we shall seriously challenge the Maastricht treaty and look for changes to it which would lead back to less pressure for federalism? Does he agree that a common currency—I ask him to be very explicit in his view—would lead to either increased interest rates or greater regional unemployment?

Mr. Rifkind: On the latter point, with regard to a single currency, that is obviously part of the current debate as to what the implications of a single currency would be. I shall not comment on that this afternoon. Those are issues that would need to be addressed before the Government could come to a judgment as to what the national interest might justify. However, with regard to any changes to the Maastricht treaty or to other parts of the acquis, we are very willing to argue robustly for changes wherever we believe that policies are being


implemented in a way contrary to that which the Council of Ministers intended when the proposals were originally approved.

Mr. Stuart Randall: Is not it the case that the Foreign Secretary said that British national interest would be the starting point in negotiations at the IGC? Why will he therefore not support the idea of extending majority voting in areas where there is a clear national interest, as in research and development?

Mr. Rifkind: I do not accept that that would be in the national interest. One of the most crucial questions is control of public expenditure, and there has often been a tendency in a majority of other countries to have a much laxer approach to increasing public expenditure, including in that area, than we believe appropriate. Therefore, I do not acknowledge the point that the hon. Gentleman is implying.

Mr. Tim Rathbone: Does my right hon. and learned Friend accept that there is a dilemma in people's minds on both sides of the House about the question of a referendum, in that those who defend the rights of this Parliament seem to be the ones who argue most vociferously for having a referendum, which would undercut those rights? Will he bear that in mind when approaching that subject?
Will my right hon. and learned Friend also bear in mind the help that we would gain as a nation from the extension of qualified majority voting to the reform of some of the areas of Community activity where we want to see reform, most particularly, perhaps, the common agricultural policy, to which he referred in his statement?

Mr. Rifkind: The reform of the common agricultural policy is already subject to qualified majority voting in every respect other than the guidelines of total expenditure. All the changes that we would wish to see can, almost without exception, be achieved under the existing arrangements of qualified majority voting in the CAP. The problem is getting the majority. That is itself a pretty difficult task, but it is not the system of voting that is the difficulty in this case.

Mr. Terry Davis: If the Foreign Secretary is serious about giving people control over their own lives, why will he not put the results of these negotiations to the British people in a referendum?

Mr. Rifkind: We do not yet know what the results of the negotiations will be. As my right hon. Friend the Prime Minister said some time ago, we cannot contemplate how to present the results of the negotiations until we know whether they are minor, significant or substantial.

Mr. Nicholas Budgen: May I congratulate my right hon. and learned Friend on making it plain that Britain does not want any further moves towards federalism in Europe, but may I suggest that that will not be enough for the British people and that, at some stage, we shall have to say no to one of the ludicrous laws that comes from Brussels, to disobey and

thus demonstrate to the peoples of Europe that we must have a looser relationship through amendment of existing treaties?

Mr. Rifkind: I thank my hon. Friend for his earlier comments. With regard to the latter part of his question, the appropriate way to ensure the protection of the national interest is to enter into negotiation on any changes that we believe to be necessary. Of course, negotiations are always difficult—they are difficult for other countries as well. The unanimity that is a protection for us is also a protection for them, but, in such a partnership, one needs to identify what is acceptable to each member state if the European Union is to prosper.

Dr. Lynne Jones: Do not the Foreign Secretary's comments about the European Court of Justice smack of sour grapes, especially after this morning's ruling on the working hours directive, which surely exposed the Government's dishonesty in attempting to suppress information from the Department of Health, which stated that working more than 48 hours a week doubles the risk of coronary heart disease and that it is a myth that working longer hours means working more productively? Did not the Government know that their case was fundamentally flawed when they brought it? Surely the answer should have been not to bring it in the first place.

Mr. Rifkind: If the requirement of a maximum of 48 hours were to apply to hon. Members and, in particular, to members of the Government, that would represent a remarkable change in our life style. Whether it would improve my health is not for me to comment on.

Mr. Edward Leigh: I welcome my right hon. and learned Friend's espousal today of a vision of a Europe of sovereign nation states, and I note his comment that we have few allies. If negotiations do not make satisfactory progress from our point of view, is he prepared to veto the whole process?

Mr. Rifkind: This negotiation may run for a whole year, so I shall not speculate on what might happen at the end of that process, but we can prevent any proposals from other countries that we find unacceptable. There is an absolute requirement for unanimity. That sometimes works to our advantage and it might sometimes work to our disadvantage, but it ensures that no new proposals can be imposed on us without our agreement.

Ms Jean Corston: In his statement, the Foreign Secretary said that the Government are approaching the IGC with confidence and determination. Why then do the Government so lack confidence in their Back Benchers that they have refused to table a motion that could be amended, for the debate on Thursday week? Is it because they know that they could not win such a vote? Is that not a sign of weakness and cowardice?

Mr. Rifkind: On the contrary; it has been the custom, in relation to all previous conferences of this sort, to provide an opportunity for the House to debate and to raise such issues at the beginning of the negotiation. When


conclusions were reached, the Government would of course require the support of the House if any were to be implemented.

Sir Teddy Taylor: In welcoming the publication of the White Paper and the broad thrust of the proposals—apart from the Foreign Office Euro-nonsense on page 3—should we not feel rather depressed, observing that the wording of this morning's decision by the Advocate General effectively means that the whole social chapter will be applied to Britain, despite the massive battle that the Government have put up? We give the Foreign Secretary our best wishes for his hard battle; does he agree that there is no way that he will bring any treaty to the House unless the European Court of Justice fundamentally changes its policies?

Mr. Rifkind: What we have today is an opinion by the Advocate General. We shall continue to argue our view to the Court, but as I said in my statement and in the White Paper, even if we are unsuccessful, we shall raise the matter, if necessary, in the IGC and seek the treaty or other changes that will be necessary, to ensure that the Council of Ministers' decisions are not rendered nugatory by an abuse of the procedure.

Mr. Denis MacShane: The White Paper will repay careful study. On a quick reading, however, one verb jumps from many a page: oppose, oppose, oppose. The trouble with the White Paper is that, rather than being a document of constructive Government engagement, it is a document for the Back Benchers of the Foreign Secretary's own party.
Will the right hon. and learned Gentleman tell us whether Sir James Goldsmith will be consulted in connection with this document or future White Papers? He certainly seems to be determining Cabinet policy on the referendum at present.

Mr. Rifkind: I suggest that the hon. Gentleman read the document. He was good enough to acknowledge that he had not yet had a chance to do so—and, if I may say so, that was obvious from his question.

Mr. Iain Duncan Smith: My right hon. and learned Friend will have noticed that many hon. Members have mentioned the European Court of Justice. Does he accept that the European Court has become the ratchet of centralisation, mostly because it legislates by reading what it believes to be the intentions of the legislators, rather than treaty-based documents? I urge my right hon. and learned Friend, at the forthcoming IGC, to get our partners to agree to exclude that possibility from future judgments; part of the problem will then be resolved.

Mr. Rifkind: I agree that good progress would be made if there were a requirement for strict interpretation of matters in the treaty or the directives. That would not eliminate, but would considerably reduce, the opportunity for the European Court to make law as opposed to interpreting it. That could only be in the public interest not just of this country, but of Europe as a whole.

Mr. Mike Gapes: The Foreign Secretary said that he wanted a flexible Europe, and also

enlargement. Given that other European Union countries are hardly likely to agree to an enlargement to 27 states without moving towards qualified majority voting, does the right hon. and learned Gentleman's position mean either that he favours total inflexibility and immobility in the Union, or that he is really against enlargement?

Mr. Rifkind: The hon. Gentleman implies that we do not already have substantial qualified majority voting. He knows perfectly well that we do: that is the whole point. We have a substantial amount of qualified majority voting on the common agricultural policy, the single market and a number of other matters. We believe that that process has gone far enough, and we do not see any need to take it further because of enlargement. I reflect on the fact that NATO, with 15 members, has never had a vote in the past 50 years—it has never had a vote in its history—yet it has been able to function very effectively. I know that we are talking about a different organisation, but to some extent similar principles apply.

Mr. John Butcher: Does my right hon. and learned Friend agree that, over the centuries, Britain's time-honoured role has been to speak on behalf of the peoples of Europe and to protect them from the actions of patrician and arrogant elites—whether those elites incorporate kings, emperors, dictators or Commissioners? Does he also agree that it is honourable and not sceptical to oppose policies in Europe that would produce a slow but inevitable economic decline, and that it is honourable and not sceptical to oppose forces that would still like to bring about a European corporate state? I congratulate my right hon. and learned Friend on the tone of his statement and the way in which he set out his objectives in that regard, but I ask him to consider seriously the points that have been made about the European Court of Justice. Britain is uniquely defenceless against its acts.

Mr. Rifkind: I agree that the European Court is a matter of increasing importance. I said in my statement that, in addition to the White Paper, we would publish a memorandum in the near future that would go into greater detail about what we believe ought to be achieved and ought to be negotiated with our partners. That demonstrates the priority that we attach to the subject.

Several hon. Members: rose—

Madam Speaker: Thank you. We shall now move on to other business.

Mr. Tam Dalyell: On a point of order, Madam Speaker. Will hon. Members who have been standing for an hour without being called get favourable consideration the next time that the subject of the statement comes up?

Madam Speaker: The hon. Gentleman knows that with a major statement, it is virtually impossible to call all hon. Members who are anxious to put questions. Questions went on for more than an hour. I assure the hon. Gentleman that I am fully aware of the Members whom I have not been able to call. I have a complete list


of such Members from both sides of the House. I cannot give a commitment that they will be called the next time that the subject comes before us.

Mr. Tony Banks: rose—

Madam Speaker: Just a moment; I have not finished. The hon. Gentleman has a lot to say; I have quite a lot to say, too. I cannot give a commitment that those Members will be called next week when we debate the subject, but I shall certainly do my best to ensure that they are recognised as often as I can. I know who has been standing today, how long the statement went on and the keenness with which Members wanted to question the Foreign Secretary.

Mr. Banks: On a point of order, Madam Speaker. During a ministerial statement, do you have to follow the convention of calling Privy Councillors, who all get called nearly every time that we have a statement? I understand that they take precedence in debates, but does that hold true for ministerial statements?

Madam Speaker: I called the hon. Gentleman twice out of the last three times that the Prime Minister made a statement on European affairs at the Dispatch Box. I have a list of the times that hon. Members are called. The hon. Gentleman does very well indeed at statements. If he would let me have a list of the Privy Councillors who have had privileges over him, I should be glad to receive it. I called two Opposition Privy Councillors. One of those I called first, the other by no means first, but way down the list. I am not clear about the Privy Councillors on the Government Benches. I tend to call some of them first, but by no means do they get priority during statements. They receive a little priority during debates, but certainly not for asking questions on statements.

Mr. Banks: How many were left standing?

Madam Speaker: I asked the hon. Gentleman to let me have a list of how many stood in the first place. I know how many there were; I doubt whether he does.

DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 101(4) (Standing Committees on Delegated Legislation),

ROAD TRAFFIC

That the Vehicle Excise Duty (Immobilisation, Removal and Disposal of Vehicles) Regulations 1996 (S.I., 1996, No. 107) be referred to a Standing Committee on Delegated Legislation.—[Mr. Bates.]

Question agreed to.

Welfare of Broiler Chickens

Mr. Alan Meale: I beg to move,
That leave be given to bring in a Bill to protect the health and welfare of broiler chickens kept in indoor husbandry systems.
The UK chicken flock comprises two separate flocks. One is kept to lay eggs. Most of those birds are kept in battery cages and their welfare problems are relatively well known. In the other, much larger, flock, chickens known as broilers are reared for their meat.
In Britain, we rear over 700 million broiler chickens a year, yet they are the only one of the UK's major factory-farmed animals to have no specific laws to protect them. The Welfare of Livestock Regulations 1994 contain detailed provisions on pigs, calves and battery hens. On broiler chickens, however, the law is largely silent despite the severity of the health and welfare problems encountered by the birds.
The vast majority of broiler chickens are reared intensively indoors. They are kept in huge, windowless sheds that often hold up to 30,000 birds. The sheds are so overcrowded that, as the birds grow bigger, one can barely see the floors, so thickly are they carpeted with chickens. There are fears that the maximum stocking density recommended by the Ministry of Agriculture, Fisheries and Food in its welfare code is frequently exceeded. To solve that problem, the Farm Animal Welfare Council recommended in its 1992 report on broilers that the maximum stocking density should be laid down in legal, binding regulations, rather than being left, as at present, to an unenforceable welfare code. To date, the Ministry of Agriculture, Fisheries and Food has failed to act on that recommendation. No maximum stocking density is laid down by law. I hope that my Bill will remedy that omission.
The worst welfare problems, however, stem from the broiler industry's use of selective breeding methods and rich diets to get chickens to reach their slaughter weights in double-quick time. Today's broiler chickens have been bred to reach their slaughter weights in only six weeks. That is twice as fast as 30 years ago. It is the muscle that grows quickly—the part that is sold for meat. However, their legs fail to keep pace and cannot properly support the overgrown body. As a result, each year millions of chickens suffer from painful, sometimes crippling, leg disorders.
Academic research, which assessed the walking ability of broilers, suggests that as many as 180 million chickens a year are suffering from those painful problems. Indeed, the Farm Animal Welfare Council's working group found leg problems of varying degrees of severity on almost every farm that it visited. In the worst cases, chickens are incapable of sustained walking and can move only with the help of their wings or by crawling on their shanks.
Professor John Webster, head of the veterinary school at the university of Bristol, describes those broilers as suffering from a long list of painful bone and joint disorders. He adds that the chronic pain suffered by many of them
must constitute the single most extreme example of man's inhumanity to another sentient creature".
Hon. Members should know that broiler chickens reared in Britain are growing too fast not only for their legs, but for their hearts and lungs. Many birds develop


congestive heart failure, which causes ascites—a pooling of body fluids in the abdomen. About 7 million broilers die of ascites each year before reaching their slaughter age of six weeks.
Professor Webster also said:
It is absolutely not right that animals in the first weeks of their life should be experiencing heart disease; it is absolutely not right that animals in the first weeks of their life should be crippled.
That is something with which I agree wholeheartedly.
A significant number of broilers suffer from painful breast blisters, ulcerated feet and hock burns. Those injuries arise because, owing to leg weakness, many birds spend long periods squatting down on the litter. That is often contaminated with droppings and prolonged contact with it can lead to the injuries to which I have referred. Wood shavings are the material most commonly used as litter in broiler sheds. After two or three weeks, however, often there are hardly any wood shavings left; what remains is largely solid poultry manure. Improved litter management is a key factor in reducing the incidence of breast blisters, ulcerated feet and hock burns. My Bill includes a requirement that litter is kept clean and dry.
Regular inspections are essential if acceptable standards of broiler health and welfare are to be achieved. Indeed, the Farm Animal Welfare Council recommended that a law should be brought in requiring all flocks to be inspected twice a day. My Bill includes such a requirement. I fear that, at present, the absence of adequate inspections means that many diseased, injured or dying birds are not being identified as such and, as a result, are given no appropriate attention or treatment.
So extreme are the health problems of today's chicken broilers that if, instead of being slaughtered at six weeks, they were allowed to live on, 80 per cent. would die before reaching the age of puberty at 18 weeks. That presents a massive problem to one particular sector of the broiler industry. The broiler breeders—the birds whose role it is to produce the subsequent generations—must remain fit and healthy into adulthood so that they can breed. If fed normally many would, as I have said, die before reaching puberty. Those that survive would suffer from reduced fertility.
To address those problems, the parent stock—the breeders—are fed on restricted rations to slow down their growth rate. One study found that broiler breeders ate only a quarter to a half of what they would have eaten if given free access to food. The researchers concluded that restricted-fed broiler breeders are
chronically hungry, frustrated and stressed.

There can be no justification for keeping birds in a state of constant hunger. My Bill requires broilers to be given sufficient food to prevent hunger.
Further problems arise during what the industry calls harvesting, which is when the birds are removed from the sheds and packed into crates ready for the journey to the slaughterhouse. Teams of catchers depopulate the sheds at great speed, carrying four or even more chickens in each hand. The birds are held by just one leg, with rough handling being commonplace. The extent of the brutality involved in the catching process was highlighted in a Bristol university study that examined the cause of death in broilers that were dead on arrival at the slaughterhouse. Just over half had died from heart failure. The researchers presumed that, for those birds, the stress of catching, loading and transporting had been simply too much for them to cope with. Some 35 per cent. had died from traumatic injuries, with a dislocated hip being the most common injury. That was associated with profuse haemorrhaging and in about one third of the cases the femur—a major bone—had actually been forced into the chicken's abdominal cavity. The researchers suggested that catching and carrying large birds by one leg is conducive to dislocation of the hip. Clearly, the catching process is not just stressful and frightening for the chickens, but in many cases leads to injury and even death. My Bill requires catching to be carried out in such a manner as to avoid injury to the birds.
I believe that if people knew of the suffering experienced by broiler chickens in Britain there would be a public outcry no less strong than that occasioned by the export of calves. Urgent reforms are needed to deal with the very serious health and welfare problems experienced by chicken broilers. My Bill would require the broiler industry in Britain to take a much more responsible approach in the rearing of its chickens. I hope that, one day, the Bill will stand as a benchmark for this House and for the remainder of Europe.

Question put and agreed to.

Bill ordered to be brought in by Mr. Alan Meale, Mr. Tony Banks, Sir Richard Body, Mr. Simon Hughes, Mr. Bill Etherington, Sir Andrew Bowden, Mr. Eric Martlew, Sir Teddy Taylor, Mr. Eric Clarke, Mr. Gary Waller, Mr. Terry Lewis and Mr. Don Dixon.

WELFARE OF BROILER CHICKENS

Mr. Alan Meale accordingly presented a Bill to protect the health and welfare of broiler chickens kept in indoor husbandry systems: And the same was read the First time; and ordered to be read a Second time upon Friday 22 March and to be printed. [Bill 83.]

Orders of the Day — CONSOLIDATED FUND (NO. 2) BILL

Order for Second Reading read.

Question, That the Bill be now read a Second time, put forthwith, pursuant to Standing Order No. 54 (Consolidated Fund Bills), and agreed to.

Question, That the Bill be now read the Third time, put forthwith, and agreed to.

Bill accordingly read the Third time, and passed.

Orders of the Day — National Health Service (Residual Liabilities) Bill

Order for Second Reading read.

Mr. Deputy Speaker (Sir Geoffrey Lofthouse): I must inform the House that Madam Speaker has selected the amendment in the name of the Leader of the Opposition.

The Secretary of State for Health (Mr. Stephen Dorrell): I beg to move, That the Bill be now read a Second time.
The question before the House this afternoon is extremely simple—whether the national health service should pay its debts. Until three months ago, I assumed that there was no doubt about that, not only in my mind but in anyone else's mind. It seemed to me inconceivable that anyone could believe that a public sector national health service should be expected to or have the freedom to walk away from its debts.
Still more unthinkable in my mind, until a few weeks ago, was any suggestion that the Opposition would think it desirable policy to advocate the proposition that the NHS should walk away from its debts—but that, apparently, is the argument that the House will hear in the debate this afternoon. I look forward to hearing that argument advanced because I am absolutely confident not only that it is one with which I shall not agree, but that no one outside this House will agree that the NHS should be free to walk away from its debts.

Mr. Kevin Hughes: Does that mean that the Secretary of State will have a say in what those debts are? Or will it be a case of, "You borrow as much as you like and I, Secretary of State, will pick up the tab"?

Mr. Dorrell: That is an absurd proposition. As I shall show, controls have been, are and will remain in place to limit the borrowings of NHS trusts. They are unaffected by the Bill, which deals with a very simple question—whether NHS bodies should meet their liabilities.

Dame Elaine Kellett-Bowman: Does my right hon. Friend share my astonishment that the Labour party dares to talk about paying debts? When the Labour party was in office, national health service hospitals never paid their debts on time and inflation was as high as 27 per cent.

Mr. Dorrell: My hon. Friend is entirely right: in the late 1970s I was a business man and NHS bodies were among the customers that I supplied. In those days, the NHS was famous for paying its debts late—but that situation has improved dramatically in recent years.
The question before the House is whether the public sector, particularly the NHS, should pay its debts. Until a few days ago, I had understood that it was Labour's position that the public sector should pay its debts—it did not occur to me that there was a distinction between the two Front Benches on this proposition. I thought that the Labour party believed that the NHS was a key part of the public sector and that it believed that the public sector, including the national health service, should pay its debts.
I thought that the Labour party was opposed to the proposition that the national health service should be a privatised institution.

Mr. Hugh Dykes: I share my right hon. Friend's astonishment and dismay at the perceived attitude of the Opposition.

Ms Harriet Harman: You have not even heard it yet.

Mr. Dykes: I am referring to what we have seen so far in relation to the Opposition's reaction to the Bill. Is it not more ominous than that? I thank my right hon. Friend for introducing this crucial Bill. I declare an indirect interest in that I have a constituent who has a company that is involved in helping with these matters. Is not the danger of the Labour party's destructive attitude, which is ominous, in opposing the Bill—I hope that it passes—that it will stop some crucial transactions from going ahead which would help the public in terms of new hospital developments? That will be directly the fault—

Mr. Deputy Speaker: Order. The hon. Gentleman has made a long intervention. I would like a bit of order from the Government Front Bench and from the Opposition Front Bench.

Mr. Dorrell: I am grateful to my hon. Friend the Member for Harrow, East (Mr. Dykes) for raising that point and he is entirely right. If the Labour party sustains the view that it is reported to have taken in this morning's Financial Times on the tapes earlier today—that the NHS should be free to walk away from its debts—private finance initiative partners will not see the NHS as a credit-worthy borrower under a Labour Government and all its trading relationships will be affected. As my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) reminded hon. Members, that would be a return to the payment record of the NHS when the Labour party was in power.
I have introduced the Bill because approximately three months ago it was pointed out to me that there is a weakness in the National Health Service and Community Care Act 1990—

Mr. Alan Milburn: Why did you not know?

Mr. Dorrell: Because I do not know the National Health Service and Community Care Act 1990 off by heart—and I presume that the hon. Gentleman does not either. It was pointed out to me that schedule 2, paragraph 30, of the Act—which is at the forefront of the hon. Gentleman's mind; he knows every detail of every schedule of the Act—contains the following provision:
If an NHS trust is dissolved under this Part of this Schedule, the Secretary of State may by order transfer—

Ms Harman: I know.

Mr. Dorrell: The hon. Lady may know, but other hon. Members probably have not memorised this schedule. It continues:

"or provide for the transfer to—

(a) the Secretary of State, or
(b) the health authority, or
(c) another NHS trust,

of such of the property, rights and liabilities of the NHS trust which is dissolved".
In other words, I have the power to deal with the liabilities of an NHS trust—I do not have the duty to deal with the liabilities of an NHS trust that is to be dissolved. That was the provision contained in the National Health Service and Community Care Act 1990 and in case any hon. Member thinks that this is an oversight associated specifically with that Act, it is worth referring to the fact that the National Health Service Act 1977 contained an even more general proposition, which is that an order of this kind may contain
such provisions for the transfer of officers, property, rights and liabilities as the Secretary of State thinks fit".
In other words, the door is left completely open—particularly in relation to the reorganisation of a trust—for the Secretary of State to reorganise the trust and to make no provision for the liabilities of that trust. That seems to me to be a wholly unsatisfactory basis on which to expect people to trade with NHS trusts.

Mr. Simon Hughes: rose—

Mr. John Gunnell: rose—

Mr. Dorrell: I shall give way in a moment. It is unsatisfactory for people engaging in long-term investments to support a trading relationship with an NHS trust. As I said to the Treasury Select Committee a few days ago, it is equally unsatisfactory from the point of view of the potato supplier to the hospital. Whatever the basis of the trading relationship, it is completely unsatisfactory that traders dealing with trusts should face a position where the Secretary of State has the power to reorganise the trust without making any provision for the liabilities of the trust.

Mr. Simon Hughes: I understand the point that the Secretary of State has made and I also understand the original Act. If national health service trusts have to submit their accounts every year—and they are looked at by the regional office, by the executive or the Secretary of State—and if all capital projects have to go through the accounting officer procedure and be approved, what are the circumstances in which the Secretary of State envisages that a trust would be in such a position that it would be at the risk of ending its life by the writ of the Secretary of State with a great amount of debt yet to be paid? If that were to happen, why would it not be dealt with in the normal way—by an insurance policy that ensures that the debts will be met?

Mr. Dorrell: I followed the point made by the hon. Gentleman until his last phrase. The answer to the first part of his question is that I can conceive of no circumstance where it would be in the public interest for me to use the discretion that is left to me in the legislation, and that is why I am in favour of removing it. The hon. Gentleman asked why a trader cannot insure against the possibility that I might use that discretion. Surely the


answer is that it would be absurd for the public sector to pay, through a trading relationship with a trader, to insure against a risk of the Secretary of State doing something that he has not got the slightest intention of ever doing. It would be much cheaper and much cleaner to remove a discretion that I have made it abundantly clear that I have not the slightest intention of ever using.

Mr. Hughes: I understand what the Secretary of State is saying. He concedes that one way of dealing with it is that there is an insurance that covers the risk of any arm of the NHS being in a position where it could not meet its debts—I was not talking about the insurance of the trader with the NHS, but about NHS bodies, such as the trust. That is one way of doing it, but the Secretary of State is saying that he would rather not do it that way but would rather legislate so that it is on the face of an Act.

Mr. Dorrell: That is exactly the position: I can conceive of no circumstance in which it would be legitimate for a Secretary of State to use the discretion. Therefore, I am in favour of removing the discretion—and that is the sole purpose of the Bill. As soon as I was told about the position in the existing legislation, I decided to remedy it. I have no doubt whatsoever about the public's view of this issue: they regard the national health service as their health service; they believe that the national health service should meet its obligations, just as the overwhelming majority of our fellow countrymen believe that they have a duty to meet their obligations; and they would be outraged at the proposition that I should come to the Dispatch Box and defend the right of the NHS to do a moonlight flit on its liabilities.
That is the case that the Labour party is reduced to making in this debate. It is reduced to defending the right of any Secretary of State for Health to walk away knowingly from the liabilities properly entered into by the national health service. It is no good the hon. Member for Peckham saying that that is not true, because that will be the result of voting against the Bill.

Mr. John Spellar: I thank the Secretary of State for giving way—he has made the same point about eight times and at different levels of volume. As the National Health Service Act 1977 contained a similar provision, why have these problems been created so suddenly?

Mr. Dorrell: I have made no secret of the answer to that question, which is that the issue has not previously arisen. If the inadequacy of the present provision had been drawn to the attention of any of my Conservative or Labour predecessors, they would have tackled it as I am tackling it. [Interruption.] I have answered the question—because it was pointed out to me. [Laughter.] It seems to me that—

Mr. Deputy Speaker: Order. The Chair is finding great difficulty in following the debate. He cannot hear what the Secretary of State is saying.

Mr. Dorrell: It is not difficult to defend the proposition that if someone says to a Secretary of State in charge of a major public service that the condition of the current law is unsatisfactory—and I consider the condition of the

current law and find it unsatisfactory—I should place the unsatisfactory provision before the House, as I have done, and ask the House to remedy its unsatisfactory nature.

Mr. Eric Martlew: The Secretary of State said several times:
It was pointed out to me".
Who pointed it out to him? Was it the banks, who were failing to support PFI schemes? Is that why this legislation is being rushed through the House tonight?

Mr. Dorrell: We have legislation that is brought before the House in the usual course of events to remedy something that is unsatisfactory in the present state of the law. The Opposition ask who pointed it out. It was the people with whom we are negotiating about the private finance initiative. [HON. MEMBERS: "Oh."] The House expresses surprise. If the House had read the evidence that I gave to the Treasury Select Committee a fortnight ago, it would have found that I have never made a secret of the fact that those people raised the matter. It does not seem to me to matter who raised it. What matters—

Mr. Gunnell: Will the right hon. Gentleman give way?

Mr. Dorrell: Not at the moment, because I am answering the previous intervention.
What matters is the simple question, should the NHS preserve its current discretion to walk away from liabilities properly entered into? That is the only question in the Bill that the House must decide. If Opposition Members walk through the No Lobby later, they will be voting for the NHS to walk away from liabilities properly entered into by the management structure established by the House and charged with managing the national health service.

Mr. Sam Galbraith: The Secretary of State has just admitted that there are no conceivable circumstances in which the Secretary of State and the NHS would walk away from liabilities. Why, therefore, did those individuals or groups of individuals draw that problem to the attention of the Secretary of State? Did they not believe the Secretary of State about that?

Mr. Dorrell: Perhaps they have heard the utterings of Opposition Members and are worried that Labour Members might at a time far in the future walk away from the liabilities of the health service. In those circumstances, potential traders are entitled to the assurance that the NHS will not exploit a freedom to do a moonlight flit. It is the type of behaviour that, when undertaken by directors of bankrupt shyster companies, leads to those directors being revealed on television by Esther Rantzen and her like. To argue as a specific proposition that people should be free to walk away from a liability entered into legitimately, is an activity associated with shyster, second-rate lawyers. I am amazed that the Labour party and Labour Front Benchers should want to have anything to do with such behaviour.

Mr. Gunnell: Would it not be fair to say that the Secretary of State has been told that none of the contracts for those private sector initiatives can be signed because the clause is not in place?

Mr. Dorrell: It is certainly not true that no PFI projects can go ahead because of the absence of the clause.

Mr. Gunnell: Signed.

Mr. Dorrell: Signed, go ahead—I accept the amendment. I can say that with total confidence because 48 schemes, costing a total of £225 million, in the NHS private finance initiative have already gone ahead.

Mr. Spellar: How many are held up?

Mr. Dorrell: Because they are in the national health service, they are all health-related schemes. We are negotiating with partners the details of arrangements that have already been announced, and later I shall talk about the others that are still being assessed. We are negotiating with partners the terms on which those contracts will go ahead. The inadequacy of the law was revealed in the context of those discussions, and it seems to me straightforward that the House should remedy a weakness in the law.
I have absolutely no doubt that the public view of that question would be that the NHS should pay its debts. That is the question that the hon. Member for Peckham must answer. The Bill does not change the powers and duties of trusts, which are set out clearly in the legislation. Schedule 2, paragraph 6 of the National Health Service and Community Care Act 1990 says:
An NHS trust shall carried out effectively, efficiently and economically the functions for the time being conferred on it".
The financial control regime of trusts places three clear financial obligations on trusts—to break even taking one year with another, to stay within the external financing limit of the trust and to deliver a 6 per cent. return on average relevant net assets.

Ms Harman: Where is the statute?

Mr. Dorrell: It is in section 10(2) of the National Health Service and Community Care Act 1990. Section 10(1) of the 1990 Act imposes an explicit obligation that every trust
shall ensure that its revenue is not less than sufficient, taking one financial year with another, to meet outgoings properly chargeable to revenue account.
That is one of the three financial obligations of the trusts. The other two were set out clearly in the financial control regime.
I give the hon. Lady an undertaking. If she can produce any demonstrable example of trusts borrowing irresponsibly and using their power to borrow in a way that does not match the external financing limit controls and the requirement to operate effectively, efficiently and economically within the 1990 Act, I will use the power set out in section 10(2) that allows me to define that as a statutory obligation. At the moment, there appears to be no problem for me to tackle on the issue that the hon. Lady has raised. In those circumstances it would be, to put it mildly, an absurd over-reaction to a debating point

that the hon. Lady likes making, for me to use a statutory power that has not been demonstrated to be necessary. The answer to the question, "Where is the power if it is necessary?" is on the face of the 1990 Act.

Ms Harman: First, does the Secretary of State agree that he cannot use his powers under section 10 of the National Health Service and Community Care Act 1990 to restrict the rights that trusts have under schedule 3 of that Act to borrow without his approval?
Secondly, does the Secretary of State agree that the reason why trusts have not borrowed from the private sector hitherto, despite the fact that they have had the power to do so since 1990, is that they have been unable to provide security for those loans because they have been unable to mortgage their assets? The Bill provides that security, and that is why the trusts will start borrowing.

Mr. Dorrell: The hon. Lady is wrong on both points. First, section 10(2) of the 1990 Act says:
It shall be the duty of every NHS trust to achieve such financial objectives as may from time to time be set by the Secretary of State with the consent of the Treasury".
That is a clear power, which I could use to give EFLs the statutory backing if it were demonstrated to be necessary. The hon. Lady must demonstrate that it is necessary, and she has not done so.
Secondly, the answer to the question, does the Bill provide a basis of guarantee or allow a lender to a trust access to the assets of the trust, is no, it does not; and the bar on the pledging of assets of trusts remains in place because it is in the statute.
I have answered both questions the hon. Lady asked me directly and in the negative. They are irrelevant to the key question that the House must address today, which is not whether the controls are adequate—although I should be very happy to debate that. If the House wants to demonstrate the need for extra controls on NHS trusts, it must be demonstrated that existing controls are inadequate. The hon. Member for Peckham has not done that. Whether the controls are adequate or inadequate does not alter the fact that I believe that NHS trusts and the NHS as an institution should meet the financial obligations that it properly takes on. That is the Bill's only effect.

Mr. Simon Hughes: The Secretary of State has, as yet, left two questions unanswered. The hon. Member for Peckham asked whether he agrees that it is open to trusts to borrow without his approval. The second question, which has not yet been asked, is why the original power in the 1990 Act is a power of discretion—either to pick up the tab or not to pick it up? What reasons was the Secretary of State given by his civil servants for the fact that the Bill, as originally drafted, gave him a discretion that is no longer thought to be appropriate?

Mr. Dorrell: The answer to the second part of the hon. Gentleman's question—I have asked that question myself—rests on the proposition that the same principle was carried forward from the 1977 Act. There are currently not many people advising me on the drafting of the legislation who remember the precise arguments that went on nearly 20 years ago. I have no intention of ever using that discretion, as I have already made clear to the House, which is why I am in favour of getting rid of it.
On the question about the nature of controls on trust borrowing, that is set out in the financial regime of trust financial control. If it were shown that the regime was in some sense flawed and that trusts were not living within the controls set out in this document, I would be the first to argue—as one would expect of a former Treasury Minister—that we need to take effective action to ensure that trusts live within their financial obligations.
Trusts can borrow without my specific consent, but they must first show that they are borrowing in a way in which good value is delivered. The overwhelming scale of trust borrowings—[Interruption.] They do because they have a statutory obligation, which I have read out to the House, to trade in an effective, efficient and economical manner. A trust that borrows expensively when a cheap alternative is available would very quickly and quite properly find itself before the Public Accounts Committee, with its accountable officer sitting beside Mr. Alan Langlands, the accounting officer for the NHS, explaining why it was borrowing expensive money when cheap money was available in the public sector.
The hon. Member for Peckham, however much she may throw up dust and fog around this issue, has failed to obscure the central question of whether the NHS will stand by its liabilities. That is the only question that the House is being asked to decide today. I assure the House that if the trust financial regime is shown to deliver inadequate control on trusts, we shall of course address that inadequacy. I have given that assurance three times now. She has not, however, shown that the trust financial regime is inadequate.
The hon. Lady has spoken to many people on this subject, and I look forward to hearing what she has to say in the debate. If she plans to argue that we need extra controls on trusts' financial obligations, she will have to demonstrate that they are not staying within the existing financial regime, which provides all the controls that could possibly be required.

Mr. William O'Brien: The issue of the trusts is central to the Secretary of State's argument. He has raised the issue of the trust walking away from its responsibilities. As all trusts are approved by the Secretary of State and are responsible to him, will he tell us how a trust will be able to walk away from its liabilities?

Mr. Dorrell: The Bill's purpose is to provide that trusts and the NHS as a body cannot walk away from their liabilities. I do not think that a public sector body should have that freedom, which is why I am proposing to withdraw from the Secretary of State the discretion in the current law to reorganise a trust without providing for its liabilities.
The answer to how much a trust can borrow is the amount set out in its external financing limit.

Ms Harman: It is £5 billion.

Mr. Dorrell: The hon. Lady says that the amount that trusts can borrow is £5 billion. That is perfectly true. The amount that one trust can borrow is set out in its EFL, or in the amount that is provided for in the figure underlying its EFL.
The Bill does not change any of those controls, and no evidence has been produced to suggest that the controls are inadequate. As has already been revealed in this debate, the fact is that the Bill changes—[Laughter.] It changes nothing, because I have not the slightest intention of using the discretion that it removes. Therefore, the Bill will have no practical consequence—unless one believes that the members of a successor Government want to protect for themselves the freedom to walk away from NHS liabilities that have been properly entered into. That is the Bill's only effect and it introduces only that change. It changes nothing unless one believes that a successor Government want the freedom to walk away from NHS liabilities.
The proposals in the Bill cannot be answered by talk about the approvals process, as that would be a red herring. I am quite happy to defend the approvals process, but that is not the question before the House. The question is whether a debt, once entered into by the NHS, should be paid. If we believe that the answer to that question is yes, we should vote in the Aye Lobby at the conclusion of the debate. If we believe that the answer is no—

Mr. Spellar: Will the Secretary of State give way?

Mr. Dorrell: I shall give way in a moment. I have plenty more to say; I am not finished yet.
If the answer to that question is no, we are entering a quite extraordinary world, in which the first element will be a completely new definition of stakeholding. Opposition Front Benchers are now defining for us their belief that, should someone be a creditor of the NHS under Labour, he will no doubt hold a stake in it, but he cannot be sure of being paid. He would be given a piece of paper that was of as much value as a voucher issued by the Tsarist railway system. Opposition Front Benchers want to retain the freedom to walk away—[Interruption.] I am absolutely on my place. They want to retain the freedom to walk away from liabilities, in the manner of a tinpot third-world country, which is exactly the type of behaviour we condemn when it is unearthed in the darker fringes of the corporate sector by investigative journalists.
I should have thought that Opposition Front Benchers would want nothing whatever to do with such a practice. That is the type of shyster trick beloved of smart Aleck lawyers, who pay attention to the small print without recognising the liability that every taxpayer who pays for the NHS wants us properly to respect. Nye Bevan must be turning in his grave at the way in which Opposition Front Benchers are demeaning the name of the service that he established. They want to preserve for themselves the freedom that they condemn in the dark fringes of the corporate sector.

Mr. Spellar: rose—

Mr. Dorrell: I have excited the hon. Member for Warley, West (Mr. Spellar), and I give way to him.

Mr. Spellar: The Secretary of State has been slightly confusing. Stripping away all the rhetoric, he has given a very interesting redefinition of risk management and risk assessment in the health service and under the PFI. Is he saying that the PFI will be reckoned as guaranteed by the


Department of Health, with no risk to the private sector? How does that affect its relationship to the public sector borrowing requirement?

Mr. Dorrell: I am saying no such thing. All that I am doing is removing from a private sector trader dealing with the health service—whether a PFI partner or the famous potato dealer—the risk that a Secretary of State might walk away from a properly defined liability on the health service. The whole point of the PFI—which I shall address later and which I am sure that the hon. Member for Peckham will want to touch on in her speech—is that it defines a series of risks that do not rest on the health service or the public sector and are therefore not liabilities of the public sector which are dealt with in the Bill. Those risks are taken by the private sector partner—that is the point of the PFI.
The purpose of the Bill is not to address those liabilities and risks, but to address the relationship between every NHS trust and every supplier of goods and services to that trust, such as the PFI contractor and the potato supplier. My belief—I am sure that it is held by all my hon. Friends—is that the NHS should honour its obligations to those people while understanding that they have taken on properly assessed commercial risks in the establishment of that trading relationship with the health service.

Mr. Kevin Hughes: Will the Secretary of State give way?

Mr. Dorrell: No, I must make progress.
I said that Nye Bevan must be turning in his grave at the prospect of the NHS being dealt with in that way. I notice that other, more contemporary people, do not associate themselves with the tactics of the hon. Member for Peckham. The hon. Lady has tabled a reasoned amendment to the Bill, which she believes is exclusively related to the PFI—I do not deny the Bill's relevance to the PFI, but it extends far beyond it. The hon. Lady believes that the Bill relates only to the PFI; I therefore find it passing strange that not one member of the shadow Front-Bench Treasury team was prepared to put his or her name to the reasoned amendment tabled by the hon. Lady.
The shadow Chancellor, the shadow Chief Secretary and the hon. Member for Edinburgh, Central (Mr. Darling) have all been visiting potential PFI partners and trying to sound orthodox. They have been trying to underwrite Labour's respectability in that community. Members of the shadow Front-Bench Treasury team who are touring that circuit will find their hosts choking on their prawn cocktails when they explain to them that they want to preserve the freedom to walk away from private finance liabilities.
The hon. Member for Peckham must answer another question in the context of the debate. She does not merely have to explain why the shadow Treasury Front-Bench team wants nothing to do with the reasoned amendment, but whether she has yet resolved her difficulties with her colleagues on the Opposition Front Bench about their attitude to the PFI. It is not only every potential PFI partner, but everyone working in the health service and every voter who want some clear answers.

Ms Harman: I shall give them.

Mr. Dorrell: I look forward to that as it will be a first.
I shall remind the hon. Lady of where she is coming from in terms of the obscurity of Labour's position on the PFI. On the "Today" programme on 28 November the hon. Lady said that the PFI was
a new trick to privatise the Health Service.
That was the hon. Lady's line, and it was not just a slip of the tongue. We both attended a public meeting in Birmingham town hall at the beginning of this year and, with my own ears, I heard her say:
I don't call it a Private Finance Initiative, I call it a privatisation initiative.
The hon. Lady has twice taken that line—she was explicit and specific: she is against the PFI.
The hon. Member for Dulwich (Ms Jowell) used to be a member of Labour's Front-Bench team. She made it clear that the hon. Member for Peckham was not the only one to hold that view. The hon. Member for Dulwich said:
The Private Finance Initiative is the Tories' route map to the privatisation of the Health Service.
Those views are entirely wrong, but, more interestingly in the context of today's debate, they reveal the position of the shadow health team on the PFI: its members are explicitly and clearly against it.
The hon. Member for Peckham says that the Bill is all to do with the PFI and I am responding to her concerns about that. If the Bill is all about the PFI, the House, in order to consider the Bill, needs to know where the hon. Lady stands on the PFI. We need to hear the hon. Member for Peckham reconcile her position with that of the hon. Member for Rother Valley (Mr. Barron).
While the hon. Member for Peckham says that she is against the PFI and calls it the privatisation initiative, the hon. Member for Rother Valley told the Association of the British Pharmaceutical Industry in January:
We do not disagree with the PFI, how could we? It was Labour who first thought of partnerships between the public and private sector.
The hon. Lady says that she is against the PFI; the hon. Member for Rother Valley says that he is in favour of it and that it would be inconceivable for the Labour party to oppose it.
At least the hon. Member for Rother Valley has the leader of the Labour party on his side. The leader of the Labour party was explicit about the PFI and health when he said at the party's conference in 1994—

Mr. Milburn: We have heard this old story before.

Mr. Dorrell: The hon. Gentleman says that it was a long time ago—it was 17 months ago. Are we to believe that the Labour party has changed its position on the subject in 17 months? Are we to believe that the leader of the Labour party goes to his party conference and sets out his stall and, 17 months later, a member of the Labour party's Front-Bench team says, "That was all 17 months ago"?
Seventeen months ago the leader of the Labour party said:
We would get public and private finance working together in transport, in housing, in capital projects in health and education.

Ms Harman: Yes.

Mr. Dorrell: The hon. Lady says yes—public and private finance will work together in health and education.


I look forward to hearing the hon. Lady explain to the House how she anticipates getting public and private finance to work together while defending the proposition that the NHS must be free to walk away from its debts. Those propositions make strange bedfellows and I look forward to hearing the hon. Lady's explanation.
As well as making that statement at the Labour party conference, in the Budget debate in the autumn of 1995, the leader of the Labour party was once again explicit when he said:
The PFI is right in principle."—[Official Report, 28 November 1995: Vol. 267, c. 1077.]
We need the Opposition Front-Bench team to tell us their policy on the PFI in the health service. Does the Labour party believe that it is a privatisation initiative? If it does and it can demonstrate that, I imagine that most hon. Members would make common cause against it. It is because I do not believe that it is a privatisation initiative, but believe that it reinforces the delivery of high quality public health, that I am a strong supporter of the PFI. In that, I enjoy the support of the hon. Member for Rother Valley and the right hon. Member for Sedgefield (Mr. Blair), but I do not enjoy the support of the holder of the shadow health brief, the hon. Member for Peckham. I look forward to hearing how the hon. Lady reconciles those positions.

Mr. Jacques Arnold: Does my right hon. Friend realise that my constituents do not consider the PFI as a privatisation initiative, but see it as a massive opportunity for a new district general hospital? The hon. Member for Peckham (Ms Harman) does not have the support of Gravesham Labour party, which has been deafening in its silence on the subject because it supports the PFI as a great hope for the future.

Mr. Dorrell: I entirely agree with my hon. Friend, who speaks for his own constituents, who rightly see the PFI as the best way of delivering—not just to his constituents—more than 25 other big projects in the health service. They are currently being assessed and some of them have already been approved—25 projects costing £25 million or more are all going ahead under the PFI. Three of them have been given the go-ahead already. At Budget time I announced that we were taking the PFI up a gear and would be assessing all the projects coming through the system. I anticipated that the go-ahead for those projects would be announced at the rate of about one a month. That was three months ago and so far we have approved three projects. I regard that as delivering almost precisely on the prediction that I gave at the time of the Budget.

Mr. Martlew: About 18 months ago the second stage of the Cumberland infirmary in my constituency was ready to go to tender, but it was stopped because of the private finance initiative. My constituents are suffering as a result of the PFI, which is simply a delaying tactic designed to save the Government some money.

Mr. Dorrell: Anyone who believes that the PFI—which offers the possibility of investing in health service capital stock without any need for Treasury authorisation or queuing for rationed capital within the context of conventional public sector capital planning processes—is a delaying tactic with regard to NHS capital investment

is living in a different world from the one in which I have lived all my adult life. The hon. Gentleman knows that the project in his constituency is being assessed, together with 25 others. He knows also that the Government have increased publicly funded capital investment in the health service by nearly 70 per cent. in real terms, whereas Labour cut it by 30 per cent.
Despite the increased pace of capital investment in the health service, 10 big projects have gone ahead in the past 10 years—that is roughly one a year. Since the programme was launched on a higher plane at the time of the last Budget, we have been announcing projects at a rate of one a month. Exchanging a system that approved projects at the rate of one a year for a system that is currently approving them at the rate of one per month seems a significant improvement—[Interruption.]

Mr. Deputy Speaker: Order. There are far too many sedentary interventions—not least from the Opposition Front Bench.

Mr. Dorrell: To move from one project a year to one a month is, by anyone's definition, a significant increase in the health service's capital investment programme.

Mr. Rhodri Morgan: Name them.

Mr. Dorrell: I shall name three schemes for which I have announced the go-ahead: the South Buckinghamshire NHS trust, St. James's in Leeds and the Royal Berkshire and Battle hospitals NHS trust. They have received the go-ahead since the Budget.

Mr. Gunnell: Will the Secretary of State make it clear that, in talking about the "go-ahead", he is referring to a go-ahead on the planning stage? Does he concede that the contract has not been signed in Leeds? We are led to believe that it will be the first contract signed, which means that the initiative has not yet provided anything on the ground: all the projects are still at the planning stage.

Mr. Dorrell: The hon. Gentleman is wrong about the initiative's not having provided anything on the ground. I have referred to 48 smaller schemes and £225 million which has been provided under the private finance initiative. It is true that none of the three big schemes that I announced since the Budget has been signed. At the time, I would have been amazed to hear that the contracts would be signed within three months. It is an absurd idea that one can sign the contract for a £38 million or £40 million scheme—sketch it out on the back of an envelope and sign all the documentation—within a week. Anyone who believes that has never met a lawyer.
Labour Members live in a totally surreal world. We announced the go-ahead for one scheme in December and for the other two in January. It is totally absurd to suggest that I should come to the House with a great pile of contractual documents six weeks after the announcement of intent.
If the House is to address the issue seriously this afternoon, it must recognise that the health service faces a huge task in ensuring that it puts in place all the capital stock that can be used to deliver high-quality health care into the next century. The Leader of the Opposition and the hon. Member for Rother Valley (Mr. Barron)


recognise that fact, but apparently the hon. Member for Peckham does not. Today she has the opportunity to emerge from the shadows and to make two things clear to the House and to the country: first, that she believes that the NHS should pay its debts; and, secondly, that she favours the kind of public-private partnership that has been espoused by her hon. Friend the Member for Rother Valley and by her right hon. Friend the Leader of the Opposition and which is being carried forward by the Government. The time has come for her to respond to those two simple points.

Mr. Simon Hughes: On a point of order, Mr. Deputy Speaker. I do not know whether it is the fault of the amplifying system or the Secretary of State, but we should not have to listen to his shouting in future debates. It is a serious point: whatever the merits of his argument, the Secretary of State shouted at us for almost 50 minutes. Perhaps the amplifier volume could be turned down so that we are not blasted out of the Chamber.

Mr. Deputy Speaker: That is not a serious point of order.

Ms Harriet Harman: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
this House declines to give a Second Reading to the National Health Service (Residual Liabilities) Bill because it does not include safeguards against government abuse of the Private Finance Initiative to advance privatisation of the NHS with damaging effects on patients and staff; gives an open-ended commitment on the part of the taxpayer to honour the liabilities of NHS Trusts irrespective of the manner in which they have accrued; and fails to ensure government appraisal and control of potential liabilities or their adequate scrutiny by Parliament.
This is a short Bill, but, if passed by the House, it will have long-lasting consequences for the national health service. The legislation raises five key points. First, it shows that the Government's promises about hospital building are set to be broken. Up and down the country, new hospitals promised by the Government are no more than castles in the air. The Secretary of State said that he is moving the programme to a higher plane—it is not merely a higher plane: it is in outer space. It is not about hospitals on the ground, but castles in the air.
Secondly, the Bill exposes the private finance initiative as a Trojan horse for privatisation. Thirdly, it offers a blank cheque of up to £5 billion from the public purse as the price of baling out the shambles of the Tories' private finance initiative. Fourthly, it ends the role of the Secretary of State in prioritising and agreeing our hospital building programme. The Secretary of State looks puzzled about that. When people read the Treasury Select Committee minutes they will understand why he is puzzled: he is slightly behind the game. When he appeared before the Treasury Select Committee he did not know that trusts have the power to borrow. The Secretary of State still looks puzzled. In the course of my speech, I shall help him to understand the unintended consequences that the Bill will have for him and for any future Secretary of State.
Fifthly, the presentation of the Bill raises serious questions about the Secretary of State's competence to run the health service or to look after public money.

The problem that the Bill tries—and fails—to sort out began in 1990 when the Tories turned NHS hospitals into trusts. They made them independent and freestanding from Government and gave them the power to borrow. Because of the independence afforded by the National Health Service and Community Care Act 1990, the Secretary of State had the discretion only to take over the "assets, rights and liabilities" of trusts in the event of their "dissolution". He did not have to take over their liabilities. It is quite wrong to suggest that the parliamentary draftspeople were dozing and included provisions in the 1990 Act simply because they existed already.
Under this Bill, the Secretary of State will be compelled to take over the liabilities of NHS bodies in the event of their "ceasing to exist". So he must stand behind trusts' borrowings, but he does not have any power over how much they borrow, which trusts do the borrowing and why they borrow. That is why we oppose the Bill. The effect of the legislation, considered in conjunction with the rights of trusts as stated in the 1990 Act, is to give a blank cheque to independent trust hospitals. The Secretary of State will have to underwrite any liabilities that are incurred, even though he has no control over how they are incurred. By his own hand—pushed by the bankers, of course—the Secretary of State will have the worst of all worlds—responsibility without power.
The reason why the Secretary of State rushed the Bill into Parliament without properly thinking it through has nothing to do with the potato traders. All his talk about traders is disingenuous. When he says traders, he means bankers. The Secretary of State rushed the Bill into Parliament without properly thinking it through because he is a desperate man.
The Secretary of State's private finance initiative policy for new hospital building is a shambles. The Government have made themselves completely dependent on private finance for hospital building. They have slashed the public funds for NHS capital projects. The Budget cut the NHS capital programme by 17 per cent. in just one year. The Secretary of State promised that the gap would be filled by using private money—magic money—and that he would use his Treasury acumen to bring it in. Even if he delivers everything that he promised on the PFI—a total of £135 million next year—that is less than half what he has cut from the NHS capital programme.

Mr. Jacques Arnold: Will the hon. Lady give way?

Ms Harman: In a moment.
In their speeches and the briefings that appeared in the press, the Secretary of State and the Chancellor of the Exchequer gave the strong impression that building was about to begin on PFI-based new hospital contracts. New hospitals have been trumpeted for Norwich, Carlisle, Amersham and Swindon. [Interruption.] The Secretary of State now says that is absolutely untrue. Is he telling the House that it will not happen?

Mr. Dorrell: The hon. Lady draws no distinction between Amersham, where I have made an announcement that the hospital is to go ahead, and Norwich and Carlisle, where the projects are still subject to assessment. If we are still assessing the projects, how can I possibly say that they will go ahead? I have never said—nor would I say—that decisions have been made to go ahead with those


projects. We have decided to go ahead with three hospitals since Budget day and I listed them in the House this afternoon. The others are subject to assessment, as the hon. Lady and the House would expect.

Ms Harman: I cannot answer for anything that the Secretary of State might say. I simply refer to his speech to the Royal College of Physicians on 21 November. If he is telling people in Norwich, Carlisle, Amersham, Swindon, north Durham and Bishop Auckland that they cannot expect the hospitals that he promised, we want some clarity on that. The Secretary of State trumpeted them as his six flagship hospitals, first on the front page of The Independent on 30 May 1995, secondly, in the Health Service Journal on 5 October 1995 and, thirdly, in The Independent on 27 November 1995. In his speech to the Royal College of Physicians on 21 November, the Secretary of State said:
Over the next few months … we shall see a regular flow of new projects",
but it seems to be a flow of projects for paperwork in the Department of Health, not for building work on new hospitals.
What is the real position? Just last week, the Secretary of State was asked by the Treasury Select Committee whether any PFI contracts had actually been signed. The answer was no. None of the deals for the new hospitals has been signed. We have to watch him when he says that they have been agreed or given the go ahead. My hon. Friend the Member for Morley and Leeds, South (Mr.. Gunnell) was absolutely right about that.
The Secretary of State says that he has agreed contracts, but he is not paying for them. The local hospital trust has agreed them, but it is not paying for them. The people who are supposed to be paying for them—the banks—have not agreed them, so now he is backpedalling fast and no contracts have been signed. [Interruption.] Hon. Members say that he is not. They should have seen him on the Select Committee, when he said that he was trying to play them down. He is playing them down now because he is in deep trouble as the PFI is a shambles. The Secretary of State told the Treasury Select Committee that he could not say when the contracts will be signed. Now he is trying to play them down, but his promises to people throughout the country are set to be broken.
The Secretary of State follows a common pattern with each of the six flagship hospitals. First, he announces a new hospital, then there is a delay because the project has to be referred to get private finance, then a private finance initiative proposal emerges, but it involves far fewer beds than there are now or than were originally planned and finally, there is nothing—no contract is signed and no work begins. It is the same story up and down the country.

Mr. Henry McLeish: It is fantasy finance.

Ms Harman: As my hon. Friend says, it is fantasy finance. Let us look at each of the flagship hospitals. The first is Norwich and Norfolk district general hospital.

Mr. Jacques Arnold: Will the hon. Lady give way?

Ms Harman: I shall give way when I have dealt with the six flagship hospitals. I shall also deal with the hon. Gentleman's hospital because the Secretary of State will not tell him when it will be started.
Let me quote from a Department of Health press release about the Norfolk and Norwich hospital. The Secretary of State is screwing up his eyes to read it. Let me read it to him. It is headed:
Go-ahead for new £100 million hospital in Norwich".
The only problem is that it is dated 1990. There has been plenty of time to write on the back of envelopes, but no hospital has been built. In the press statement, the then Secretary of State for Health, who is now Chancellor of the Exchequer, confidently told local people:
Construction for the new hospital is expected to start in 1992"—
but it did not. Six years after the first announcement, there is still no hospital. No contract has been signed and the people of Norwich are still waiting for their new hospital. When will they get it?

Mr. Dorrell: I was a junior Health Minister in 1990. I was responsible for what was rather quaintly called unconventional finance. Since then, the rules for the use of private capital within the health service have been changed, as the Opposition often argued should happen, and have moved in the direction for which the Opposition argued. The hon. Lady should welcome the fact that an announcement made six years ago is now a great deal closer to fruition.

Ms Harman: The Secretary of State said that he was Minister for unconventional finance. He is now Secretary of State for unconventional finance and where is it?
It is the same story in Carlisle. Plans for a new hospital were developed as long ago as 1989. By summer 1994, the trust had finalised and submitted its plans. Carlisle Hospitals NHS trust reached the stage of signing a contract with the public sector two years ago, but it had to be stopped when the Government required the project to get private finance. Again, although the plan was first mooted in 1989, no contract has yet been signed and the people of Carlisle are still waiting for their new hospital.
It is the same story in Amersham. The plan to develop Amersham and Wycombe hospitals was approved in October 1994. Then the Tories changed the rules and said that any new hospital required private finance. No contract has been signed and no building has been started. The people of Amersham are still waiting for their new hospital.
It is the same in Swindon. The Secretary of State gave approval for a replacement for the Princess Margaret hospital in December 1993. He gave it what would now be described as the go-ahead, but in October 1994 the project was required to get private finance. No contract has been signed and the people of Swindon are still waiting for their hospital.
In north Durham, the Department of Health agreed plans with North Durham Acute NHS trust for a new district general hospital in January 1994. Then the Department said, "Sorry, but none of that is going forward. You must obtain private finance." No contract has been signed and the people of Durham are still waiting for their hospital.

Mr. Gerry Steinberg: I have a letter from North Durham Acute hospital trust saying that it will now consider two private sector bids for financing. That letter promises that the first phase of a new hospital will


be built by 1999. My hon. Friend's remarks are deeply worrying. I will be meeting the trust's chief executive, Colin Douglas, on Friday. Does my hon. Friend advise me to tell Mr. Douglas that he ought to look elsewhere for finance and not depend on the private sector because the Government will not give their permission?

Ms Harman: The problem is that if the trust looks to the public sector, it will find that Government finance for hospital building has been slashed. If the trust looks to the private sector, it will discover a whole load of bankers saying, "Health service PFI does not add up under this Government." My hon. Friend illustrates the situation well. Durham is the location of supposedly one of the programme's flagship hospitals, yet the terms of the contract have not even been agreed with the parties who are to design, finance and build that hospital—let alone the matter of getting the money from the banks.
Plans for rebuilding Bishop Auckland hospital have been in the pipeline since 1988. In 1993, local Members of Parliament received assurances from the now chair of the Tory party, then Minister of State in the Department of Health, that a new hospital would be built. In 1994, the Chancellor announced that the hospital would have to secure private finance. Again, no contract has been signed and the people of Bishop Auckland are still waiting for their hospital. The Tories' new hospital building programme is a cruel hoax—nothing more than the launching and relaunching of six flagship hospital projects, none of them built. The flow of announcements increases, but the building of new hospitals fails to materialise. The hopes of local people are raised, then dashed.
Where does that leave the Secretary of State? In the PFI process, the right hon. Gentleman has shown himself incompetent. He makes promises, trumpets them on the front pages of newspapers, and then discovers that he cannot deliver because the bankers will not sign the cheques. The whole thing is a shambles. The Secretary of State was so keen to air dogma that he overlooked the detail, which has nothing to do with potato traders. The private sector will not sign contracts involving tens of millions of pounds under current law, and it is easy to understand why. The private sector must have a contract with the trust, which is the private sector partner. Under the National Health Service and Community Care Act 1990, the Secretary of State can abolish a trust and does not have to pick up its liabilities. Any banker would be unwise to enter into a contract valued at hundreds of millions of pounds with a public sector partner that can be abolished by the Secretary of State—so the bankers will not sign. The Secretary of State did not notice that fact before announcing the PFI and cutting public sector funds, but the bankers drew it to his attention.
Because the bankers will not sign, the Secretary of State has rushed this new Bill into the House, telling us that it is about potatoes. Although the Secretary of State taking over all the debts will sort out the problems for the private sector, the Bill will create impossible problems for the public sector. The trusts retain the independent status that they were given under the 1990 Act. The Secretary of State has no powers of control over them and underwrites all their liabilities in the Bill. He is making a blanket agreement to stand behind liabilities over which he has no

statutory control. The Secretary of State is abolishing any control over or accountability for major areas of NHS capital funding. He is offering the banks a blank cheque from the taxpayer, and he tells the House that that is a mere technicality. Why should the public purse pay for NHS trust liabilities if the public have not played a part in agreeing to those liabilities? The Bill will make it impossible for the Government to oversee the £5 billion of borrowing allowed in schedule 3, which will end up as public expenditure.
Last week, the Treasury Select Committee took evidence from the Secretary of State for Health and asked him about PFI. Fortunately I was present to hear the right hon. Gentleman's replies. I pay tribute to the skilful questioning of my hon. Friends the Members for Hackney, North and Stoke Newington (Ms Abbott), for Hackney, South and Shoreditch (Mr. Sedgemore), for Newham, North-East (Mr. Timms) and for Sheffield, Attercliffe (Mr. Betts). They asked the Secretary of State about the implications of the Bill. Let us consider the right hon. Gentleman's replies.

Mr. Jacques Arnold: Surely the hon. Lady will give way now?

Ms Harman: I will give way to the hon. Gentleman when I reach the point in my speech about which he is asking, but I have not reached it yet.
The Select Committee asked why the Bill is needed now. The Secretary of State replied that the Bill remedies a problem that has existed since 1948. In fact, the problem has arisen only since the 1990 Act, which established trusts as independent. Before, they were an integral part of the NHS and their actions were controlled by and accountable to the Secretary of State. The right hon. Gentleman has not just stumbled across a problem that has been invisible for almost 50 years, but he created the situation. He was a Minister in the Department when trusts were made freestanding in 1990.
The Select Committee asked what controls exist over trust borrowing. As that question was put, the Secretary of State rudely interrupted and said that trusts do not have the power to borrow—he denied that trusts have the power to borrow. He had not read the 1990 Act. Even though the right hon. Gentleman served on the Committee that considered that legislation, was a Minister in the Department of Health and is now presenting a Bill to guarantee trust liabilities, he had not asked himself whether trusts can borrow and whether he has any control over them. The Secretary of State asserted that trusts do not have the power to borrow, not knowing that they have to borrow. That is a spectacular admission of ignorance, particularly as the Bill requires the right hon. Gentleman and any future Secretary of State for Health to stand behind liabilities accrued by borrowing trusts.
In case the Secretary of State still has not grasped the point, I refer him to schedule 3 to the 1990 Act, under which NHS trusts can borrow—forget about section 10, which does not override schedule 3. The only restrictions are that trusts should not mortgage their assets, borrow foreign currency or together borrow more than £5 billion. Trusts can borrow without the Secretary of State' approval. They do not have to tell him that they are borrowing—they do not even have to notify him. It is all the more extraordinary that the Secretary of State had


forgotten—perhaps he never knew—that trusts have borrowing powers, given that my hon. Friends and I have asked parliamentary questions about that aspect.
Last December, my hon. Friend the Member for Darlington (Mr. Milburn) asked the Secretary of State how many national health service trusts had borrowed money from commercial sources. The answer was
Information on national health service trusts' borrowing from commercial sources during the year is not available".—[Official Report, 4 December 1995; Vol. 268, c. 35.]
The trusts have the power to borrow, but they do not have to tell the Secretary of State.
We all know that the trusts have not borrowed much in the past six years. They have not been able to borrow because they have not had security for the loans and they cannot mortgage their assets. But the Bill would give them blanket security for all loans. Under the 1990 Act, they will be able to borrow up to £5 billion. The Secretary of State wants to rush the Bill through the House and press on with the PFI, not only to save himself the embarrassment of all the broken promises of new hospitals that have not materialised, but because, under the Tories, the PFI in the NHS is a Government ramp for privatisation.
Under the Tories, the PFI is not a public-private partnership, but the private sector cherry-picking deals. Under the Tories, the PFI is not private finance working in the public interest, but private commercial interests driving into the heart of the NHS. Market testing is already threatening to privatise clinical support services. The PFI is set to accelerate that yet faster and will let the private sector take over not only the design, building, financing and operation of hospitals, but the running of clinical services.
The Secretary of State says that he will not let clinical services be put out to the private sector—with a qualification—without the consent of local clinicians. That reassurance means nothing because the Secretary of State will not define what he means by clinical services and nor will he identify any mechanisms for establishing the consent or otherwise of local clinicians. Presumably, he means that if anyone applies for a job when it is advertised by the private sector, that will signify the support of local clinicians. It is no surprise that the Secretary of State does not want to be specific, because he knows that the medical profession and all those who work in the health service are wholly opposed to privatisation, especially the privatisation of clinical services.
The PFI is already set to create the first privatised NHS hospital, in Stonehaven in Scotland. The design, building and management of a new hospital, including the delivery of clinical services, will be put out to tender to private sector bidders. When the private sector is designing, building, financing, operating and running the hospital, and employing the doctors and nurses, that is privatisation and that is what the Government are all about.
The Secretary of State has asked about our position. Our position is perfectly clear, but the Secretary of State must try to distinguish between our criticisms of what he is doing and our plans for what we would do. We have made it clear that when private finance can work in partnership with public finance in the public interest to secure investment, we welcome it. We have led the way—across the whole range of services, and especially

transport—in realising that private finance can work in the public interest, but we have always been clear that our health service must be run by the NHS and that private finance must be in partnership with public finance, not a substitute for it. The public sector, not the private sector, must set priorities in the public interest.
We believe that the Tories are using the PFI in health as a back door to privatisation. This debate raises serious questions about whether people will get their much-needed hospitals.

Mr. Jacques Arnold: On a point of order, Madam Deputy Speaker. On several occasions, the hon. Lady has said that she would give way to me in a moment. Could you, Madam Deputy Speaker, tell us what a parliamentary moment is, as I fear she has not the guts to give way?

Madam Deputy Speaker (Dame Janet Fookes): Order. Whether an hon. Member gives way is not a matter for the Chair.

Ms Harman: I have just remembered that every time I have given way to the hon. Gentleman previously, he has asked me questions that had nothing to do with the issue that we were debating. I reminded myself not to waste my time, or that of the House, by answering his questions.
The Bill also raises serious questions about public services and public accountability, because the Tories are not hostile to public spending. They are hostile to public services. When it comes to the chance to privatise and subsidise the private sector, money is no object. The Tories are not prudent with the public purse, they are reckless with it. That is what the Bill is about. For the sake of our public services and the accountability of the public purse, I call on the House to decline to give the Bill a Second Reading and to support our amendment.

Mr. David Lidington: We have been treated to a speech of quite stunning disingenuousness by the hon. Member for Peckham (Ms Harman). We have heard a series of criticisms of the private finance initiative, which is now beginning to deliver benefits to my constituents and those of other right hon. and hon. Members, but we have heard not one scrap of detail about how the Opposition propose to alter the rules of the PFI to bring about the remedies that they claim are now needed. We have seen a rather feeble attempt to gloss over the differences between the hon. Lady, with her avowed hostility to the whole concept of the private finance initiative, and her deputy, the hon. Member for Rother Valley (Mr. Barron), who—rather than decry the PFI—wishes to claim authorship of it for himself and for his party.

Mr. Bob Dunn: Surely the differences are not just between hon. Members on the Front Bench but between the hon. Member for Peckham and the local Labour parties in Dartford and Gravesham, which fully support the private finance initiative in the construction of a new hospital on the Darenth Park site. The hon. Lady must know that because she has made inquiries, but she has not raised that point today. That tells me that she knows that there are no votes in the line that she is taking in the constituency of Dartford.

Mr. Lidington: My hon. Friend makes his point well.
We also heard a series of criticisms from the hon. Member for Peckham of the reduction in planned tax finance capital expenditure on the NHS in the plans published in the Budget for the financial year 1996–97. We did not, of course, hear that, even at that reduced level, capital spending on the NHS in the next financial year would still be some 50 per cent. higher than the level that the Conservative party inherited from the Labour party when we took office in 1979.
I listened very carefully to the hon. Lady's speech and I noticed that, once again, while she criticised the Government for alleged parsimony in the capital funding of public services, she was careful to make no commitment on the part of herself, her Front-Bench team or her party to increase by one penny, let alone by the billions of pounds which she claims are needed, the amount that a putative Labour Government would be prepared to spend on the NHS. The Opposition are prepared to talk in a way that encourages expectations, but again and again they refuse to spell out the cost and how it would be met.

Dame Elaine Kellett-Bowman: Is that not exactly what the disabled persons thought when they went to Labour party headquarters? The Labour party does a lot of talking, but it does not give much commitment.

Mr. Lidington: My hon. Friend puts her points in as forceful and telling a manner as usual.
Nor would one guess from listening to the hon. Member for Peckham that capital projects under the traditional Treasury route have often been subject to prolonged delay and change stretching over many years. That applies to hospitals, roads and railway projects. It is inherent in capital spending, which is dependent on Treasury finance, that it becomes subject to the exigencies of overall Government priorities for public spending. The fate of individual projects can depend on the horse trading that takes place each year between spending Departments and the Treasury on which area of the Government's overall programme should get priority for that financial year.
I want to talk briefly about the project that I know best—the one approved for the South Buckinghamshire NHS trust Amersham and High Wycombe hospitals. Although they are located just outside my constituency, they serve a great many of my constituents as well as those of my hon. Friends the Members for Wycombe (Mr. Whitney), for Beaconsfield (Mr. Smith) and for Chesham and Amersham (Mrs. Gillan).
As the hon. Member for Peckham pointed out, the South Buckinghamshire NHS trust was putting together proposals for a major capital building programme before the latest private finance initiative was launched. The project, approved in the Budget statement last year, will deliver new hospital facilities much more quickly than local people had dreamt was possible, had they had to take their turn in the queue at the Treasury door, via the traditional funding route. Moreover, the design of the new buildings, and their location, not to mention the way the various facilities will be distributed between the two sites at Amersham and Wycombe, will deliver higher-quality clinical services than would have been achieved under the plans originally drafted by local management using the

traditional Treasury funding route. It is clear to me from my recent talks with local trust managers and clinicians that they unanimously welcome the PFI, as hastening the prospect of top-quality hospital facilities for local people.
We have heard Labour party criticism of the alleged laxity of financial controls in the NHS—the alleged risk of money matters going wrong. Having looked at the projects planned in Buckinghamshire, I find it difficult to understand how anyone could believe that. I have seen the proposals for new buildings crawled over, first by the trusts and their advisers, then by the regional health authority, then by the NHS executive, then by the Department of Health and Treasury officials—all to make sure that the right safeguards are in place and that the outcome will be good NHS provision to suit the needs of local people, at a price that will deliver value for money to the taxpayer.
As the PFI progresses, there are still some difficulties to be resolved. It is a new procedure, and I am sure that Ministers will want to learn from experience of the first projects so as to be able to improve procedures as the initiative takes hold and gathers pace.
I should like to direct the Under-Secretary's attention to two points in particular. First, I hope that Ministers will always be alert to the need to avoid detailed discussions getting bogged down in the sort of Treasury-Whitehall theology that has delayed projects in the past. As an example, I offer the distinction between a finance lease and an operating lease. A finance lease amounts to providing borrowing to pay for an asset, and that would count within the public sector borrowing requirement. An operating lease is defined as a payment for a service which may include the acquisition of a building and it does not count in the PSBR. I hope that we can avoid lengthy arguments between groups of accountants in various public bodies; such disputes can slow down the attainment of an objective on which everyone is fundamentally agreed.
Secondly, I hope that my right hon. and hon. Friends will look closely at hospital trusts that may want to apply through the PFI for funding for construction—and perhaps maintenance—of buildings, but not necessarily for the management of facilities also. It will be precisely the hospital trusts that have made the greatest progress towards contracting out many of their ancillary services which may find it more difficult to let a single contract to a PFI partner for the management of those services in future.
I am certain that my right hon. and hon. Friends will try to learn from experience. I am also sure that this initiative bodes well for my constituents and for those of many other hon. Members. I wish the policy and the Bill well.

Mr. Brian Sedgemore: When I heard the Secretary of State speaking, I was reminded of the questions that Tony Hancock asked himself shortly before he committed suicide: "What does it all mean? Why I am here? Where are we going?" He answered the questions as follows: "I don't know. I don't know. I don't know." The Secretary of State spoke for 50 minutes, telling us that this Bill changed nothing. I should hate to listen to him moving the Second Reading of a Bill that did change something.
Let us imagine the scene. It is Tuesday 27 February, late evening. The shadow Secretary of State for Health is at home after a hard day. She is lost in reverie; suddenly her whole world looks like crashing in—the telephone rings. There is a man on the other end of the line. His voice is cracking and he seems close to tears. It is the Secretary of State for Health. He says, "Harriet, I'm in trouble—you've got to help me. You're my friend, aren't you?"
The Secretary of State then pulls himself together and explains that he is being blackmailed by a bunch of bankers—three times tonight he used the term, a bunch of "shysters". They are, it seems, blackmailing him into passing the Bill as part of a wider negotiating package. They are telling him, "We are business men, not risk takers." There is panic in the right hon. Gentleman's voice. He says that the Bill is to be published tomorrow, and that Second Reading must be on 5 March—last Tuesday. The Bill must be through the House by Whitsun.
The shadow Secretary of State for Health stands firm, however, and is not seduced by the blandishments of a Secretary of State who is clearly trying to con her over the telephone in the middle of the night. Some people may think this story apocryphal; it tells the House what the Bill is all about.
Then, on 4 March, the Secretary of State for Health comes before the Treasury Select Committee to be questioned about the Bill and the private finance initiative. He is usually elegant and composed, but last week he look frazzled—he had obviously had a sleepless weekend. He told us that the bankers still would not sign the PFIs, and that they wanted the Bill, together with other negotiated settlements that present hurdles which he still cannot get around.
The questioning has scarcely begun when this suave, assured, sophisticated Secretary of State suddenly loses control. I know, because I was there asking him the questions. I have the transcript with me. My question, directly related to the Bill, was about the power of trusts to borrow and about how liabilities that the Secretary of State has to meet can be built up. I asked:
Can you tell me, the trusts have the power to borrow, do they not?
The Secretary of State replied:
No, that is incorrect.
At that point, it was as though an electric charge had gone through the Select Committee. Everyone sat bolt upright in utter amazement. I was gobsmacked, to borrow a phrase usually used by the Governor of Hong Kong. Perhaps the right hon. Gentleman had misheard the question. So, with incredulity tinged with sarcasm, I repeated it:
The trusts do not have the power to borrow?
The Secretary of State replied:
The trusts do not have the power to borrow.
I am absolutely amazed by that double assertion on the part of the Secretary of State. I have in front of me a copy of the National Health Service and Community Care Act 1990. Under the heading "Borrowing", paragraph 1 of schedule 3, on the financial provisions relating to NHS trusts, states:
(1) Subject to the provisions of this paragraph and to any limit imposed under the following provisions of this Schedule, for the purpose of its functions an NHS trust may borrow (both temporarily, by way of overdraft, and longer term) from the Secretary of State or any other person.

The Secretary of State said twice in succession that NHS trusts had no powers to borrow. We have a Secretary of State who does not know what is in his own legislation, who does not understand how trusts operate, who does not understand how schemes are paid for and how liabilities, which he will guarantee in the Bill, are built up. That is astonishing. It is incredible. By any standards, it is extraordinary.
I have been a civil servant, a parliamentary private secretary—a bit of a dogsbody—and a Member of the House. I have seen Secretaries of State who are ignorant. I have seen Secretaries of State who are very ignorant, but never before have I seen a Secretary of State whose ignorance measures force 12 on the Richter scale. That is hurricane-level ignorance. The Secretary of State's behaviour seemed a bit like that of an A-level student about to take his English examination who does not know his ABC. It was a bit like a plumber walking into a house to mend a cistern and saying that he had forgotten his tools. These were basic facts that we would expect a Minister to know.
I wonder what the civil servants who were at that meeting thought about it. When I was in the civil service, we expected our Secretary of State to go to the Dispatch Box and put on a good performance. We expected our Secretary of State to go to a Committee upstairs properly briefed with all the answers. After all, there were hundreds of us providing the Secretary of State with every single bit of information. A triumph for the Secretary of State was a triumph for us, and a failure by the Secretary of State was a failure for us. As the Secretary of State displayed this astonishing ignorance, he debased and demeaned not only his civil servants and his office but the Department for which he worked.
It is worse than that. I asked how much trusts could borrow, and how great, by way of borrowing, were the liabilities that he was prepared to undertake under the Bill. Because he does not know that a trust can borrow, I imagine that his answer is "None." Paragraph 3 of schedule 3, on limits of indebtedness in relation to trusts, which the Secretary of State thinks cannot borrow anything, reads:
(1) The aggregate of all sums borrowed by NHS trusts established to assume responsibility for the ownership and management of, or to provide and manage, hospitals or other establishments or facilities which are situated in England"—
only England—
shall not exceed £5,000 million or such other sum not exceeding £10,000 million as may be specified by order made by the Secretary of State with the consent of the Treasury.
This Secretary of State, apparently, is prepared to allow trusts to borrow £10 billion under his own directions without knowing what it is about. That is why there are people like me—people who have fiduciary and fiscal probity—on the Treasury Select Committee. I have seen whole Governments collapse because they borrowed £10 billion more than they should have. Yet this whiz kid, who used to work for the Treasury, goes to the Department of Health and is prepared to see trusts borrow £10 billion and know absolutely nothing about it. What on earth is happening to our country? Is it any wonder that we are a backward, fractious island off the coast of north-west Europe, with a culture that is in irreversible decline?
Why is the Secretary of State so ignorant? My hon. Friend the Member for Peckham asked that question. One answer to that is that ignorance is quite often born of arrogance and laziness. That reminds me a ditty by Cole Porter:

"It's not 'cause I shouldn't
It's not 'cause I wouldn't
And you know it's not 'cause I couldn't
It's simply because I'm the laziest man in town."
To be fair, the Secretary of State may not be the laziest man in town, but everybody in the House now knows that he is the laziest Secretary of State in Whitehall. He has made indolence an art form. If Marlowe was right when he said,
there is no sin but ignorance",
one of the biggest sinners in the world would be the Secretary of State for Health.
The point that I want to make is that the Secretary of State continued to say that nothing could ever go wrong, that no trust would ever get to a situation where it might have many liabilities to meet, and in any case he would honour them however and wheresoever they had been caused. I shall give one example of the problems that we might face. It relates to the PFI of the Royal Hospitals NHS trust. The PFI is six, seven, eight, nine or 10 times bigger than anything that has been mentioned tonight; it is for £260 million to close St. Bartholomew's hospital and build a new 750-bed hospital in Whitechapel.
It is generally agreed that the private finance initiative is flawed, and therefore that there could be liabilities after this huge sum of money has been invested. How do I know that it is flawed? First, one of the senior figures at the East London and City health authority—the purchaser—told one of the members of the Treasury Select Committee, and I put this to one of our witnesses at the hearing, that the project was not financially viable. That is the kind of thing that my hon. Friend the Member for Peckham is saying. If someone puts in £260 million and the project is not financially available and the trust goes bust, who will pick up the tab? The Bill says that it will not be the contractors and the people who will build and manage the hospital.
We do not need simply to take the evidence of a senior figure who works for the purchaser. The financial viability was question by the York Economics Consortium, which consists of some of the most prestigious health experts in the country. It said, when expressing doubts about the capital and revenue estimates of the PFI, which will probably have to be bailed out by the Bill:
The preferred option generates an additional saving of £9m at the cost of almost £100m in additional capital spending. For this additional capital cost to be justified, the revenue benefits of the incremental spend must be reasonably secure.
We believe that there is sufficient uncertainty around the estimates of net revenue savings … that the magnitude of the assumed difference in costs between the options is extremely sensitive. Since this difference is, in any case, relatively small in relation to the total revenue expenditure of the Trust … further evidence is needed before the additional capital expenditure of £100m required to move from a do minimum to a single site solution can be justified on a purely financial basis.
The purchaser is saying, "Here's a PFI that can build up liabilities which the Government may have to pick up from the private sector." The York Economics

Consortium is saying exactly the same thing. There is also a third body, the King's Fund, which commissioned the CASPE Consulting report, which said:
Business people are used to taking risks, but of a calculated sort. The Trust is expecting to start negotiations with Private Finance Consortia soon.
I break off there. One hundred people from the private finance world seeing £260 million coming into their hands have said that they are interested. Of course they are interested. They will be particularly interested if the Bill is passed and their liabilities are picked up if and when things go wrong.
The report continued:
Even on the figures in the OBC"—
the outline business case—
it would appear wise for any of the possible consortia to check whether the CASPE Consulting St. Bartholomew's Foundation option incorporating new partnerships would not produce better returns and do so much more quickly … even the preliminary work undertaken to date suggests that a complete reconsideration and development of a new Foundation option, incorporating the service proposals of both NHS and non NHS partners, would be wise and be likely to produce a better solution for the NHS.
Those three prestigious groups, the purchaser, the York Economics Consortium and the King's Fund, which produced the original documentation on which the private finance initiative was based, are all now saying that this is a major scheme—by the standards of everything that the Secretary of State has told us, a mega-scheme—which could go horribly wrong. If it goes horribly wrong, the private finance consortia will want the Bill. They are another group of bankers who will not sign unless they get the Bill.
The Government, in effect, are promising the private finance consortia two things. First, they are promising them the Bill and, secondly, they are saying behind our backs—I put it to the Secretary of State and he said that he knew about it, and I also put it to Gerry Green, the chief executive of the Royal Hospitals NHS trust—"We can get around this because, if we get the Bill and we have got them to sign the private finance initiative, we can increase the size of the hospital from 750 to 1,020 beds."
That requires a new outline business case. The public have been told nothing about that. If I had not raised it at a meeting of the Treasury Select Committee, no one would know it even now. It would require a new outline business case and new consultation. Therefore, this is a process to avoid the new outline business case and the new consultation. It is all predicated on first getting the Bill through and then getting the private finance consortia to sign.
The Secretary of State has said that he does not want any of the private finance initiatives to take place against—I am not sure that I have his exact words—a difficult political decision. Who does he think he is kidding? Those private finance consortia really should now think hard about exactly what they are signing and exactly what response they expect from a future Labour Government who could be in power before any of these schemes have been signed. The response that they will get is the responsible attitude of my hon. Friend the Member for Peckham. Therefore, they have a lot of worrying to do about the Bill, and so has the House.

Mr. Jacques Arnold: I am delighted to support the Bill. It is a technical but none the less important measure. It is essential that contractors and suppliers to NHS trusts are secure in their credit arrangements for the work that they do for the national health service. It is absolutely important for the suppliers and for the private finance initiative.
The PFI represents building for the future of our NHS, and it is particularly relevant to the hospitals in north-west Kent. At present, hospital provision in north-west Kent is spread across three sites—the Joyce Green hospital, north of Dartford, an old fever hospital; the West Hill hospital in Dartford, an old poor law house; and the Gravesend and North Kent hospital in my constituency, a subscription hospital from the previous century.
Our in-patient hospital services are spread across those three sites and they are administered by the Dartford and Gravesham NHS trust. They are far from ideal. In fact, those hospitals have possibly the worst fabric of any in the former south-east Thames region. Nevertheless, they work for us very well because of the dedication of our doctors and nurses and everyone else who works there. But we desperately need our new district general hospital.
For years now, as in other cases mentioned in the debate, we have seen plans come and go and be put off. The reason for that is simple. If one goes to the Chancellor of the Exchequer of the day and asks for a cheque for £100 million, either one gets a dusty answer and it is back to the drawing board, or one is asked, "Couldn't it be done in phases on one of the existing three sites?" A first phase would be allowed immediately; then, after some scratching of heads and playing with the capital programme, there might be a second phase a few years down the road; later still, there might be a third phase.
The new district general hospital for north-west Kent has been designed, redesigned and redesigned again. Round and round we have gone. That is not to say that the Government have not been building new hospitals. I wanted to make this point when I tried to intervene on the hon. Member for Peckham (Ms Harman), but her courage failed her and she did not feel able to give way as she had promised to do on a number of occasions. The Government have had a massive hospital capital programme. Since they came to office in 1979, there have been 800 major new hospital projects, each costing more than £1 million. I could have pointed out to the hon. Lady that that rate of investment is more than four times greater than that under the previous Labour Government. Nevertheless, our hospital in north-west Kent has not yet been built and nor have the others to which she referred. That is the crux of the issue.
We could wait in a long queue for the capital programme to come forward from the Chancellor of the Exchequer. Of course, it is a better programme than Labour ever had, but it is not moving fast enough for us in north-west Kent or in those other places that have been mentioned. That is why the PH is so valuable and why I and my constituents resent the ridiculous political posturing of the hon. Member for Peckham. It is not good enough. We want our hospital. The hon. Lady opposes the PFI yet makes no commitment on behalf of the Labour Government that she hopes might be elected. That leaves my constituents in the limbo with which they are all too familiar, but with the difference that they would be without hope.
The PFI has given my constituents hope. They have hope because the Government, through the NHS trust, have invited bids under the PFI to build that new general hospital in north-west Kent. Four major consortia have come forward keen to succeed in their bid to build and finance the hospital and, in the long term, to run its housekeeping—the servicing, the cleaning, the provision of groundsmen, the parking arrangements, the catering and a number of ancillary services. Under the PFI, they would provide the hospital, by means of a long lease for which they would be paid a substantial fee, and all the services. When I bear in mind the fact that the budget of our NHS trust is £56 million a year, there is obviously a certain amount of scope to do precisely that.
That is not privatisation. It is private provision under a contract, but the important point which is of concern to my constituents is that the NHS will put in the doctors, consultants, nurses, medical support, administration and booking arrangements so that we obtain the best possible health care from the facilities provided.
Thanks to the PFI, four consortia are bidding to build the brand new general hospital in north-west Kent. There are big names among them. Each consortium includes a major construction company—obviously so, as they are keen to secure the contract to build a major project—a catering and hotel servicing company, a financial company and a project administration company. They are likely to create an on-going, functioning hospital, with all the efficiency that the private sector can provide when its money is on the line.
As I told the House, we were always told to have a phase here and a phase there built on current locations, which would mean Joyce Green hospital near Dartford, a site immensely unpopular in Gravesend and not much more popular in Dartford. The old NHS financing system—still supported by the Labour party—would have led to a new hospital at Joyce Green. When we asked the four private sector bidders, through the bidding process, where they would build the new hospital for north-west Kent—surprise, surprise—the message from came back loud and clear: Joyce Green is unsuitable for a new hospital. That is most fascinating for my constituents.
The bidders would prefer the Darenth Park site between Dartford and Gravesend because that is the site preferred by my constituents and those of my hon. Friends the Members for Dartford (Mr. Dunn) and for Sevenoaks (Mr. Wolfson). That is what happens when the private sector is used, rather than the old-fashioned, bureaucratic system that we had in the past and in which Labour has a great belief.
Where are we now? The four bids are being considered carefully and in detail. It is all very well for the hon. Member for Peckham to make great fun about assessment, but my constituents want arrangements for the hospital to be thorough so that it will deliver our hospital services over many decades. We are not playing games when it comes to the health care of people in north-west Kent. I hope that that assessment is thorough and quick. All the signs are that that is precisely what is happening. We shall soon have a shortlist of two. There will then he public consultation of my constituents, who will be the patients in those hospitals. The contractual negotiations will then take place with a view to contracts being signed this autumn. Under the new PH system, my constituents have the best chance of progress that they have had under any Government.
When the contracts are completed and the project has been constructed and is operating, Joyce Green and West Hill hospitals in Dartford will pass into history and the Gravesend and North Kent hospital facility will become free and available. For many years, my constituents have had a dream: to have their own community hospital providing basic health care in Gravesend. Gravesend and North Kent hospital will have the opportunity to pass to the Thameslink Healthcare Services NHS trust. It will serve a conurbation of 100,000 souls in Gravesham and Southfleet, and in Longfield and New Barn in the constituency of my hon. Friend the Member for Dartford. It will provide valuable services in our town: minor injuries, out-patients, acute active rehabilitation, elderly care, general practitioner beds, primary health, physiotherapy, dental and diagnostic services, all in a community hospital that my constituents dearly wish to have. Again, that will be financed through a private finance initiative currently costed to the tune of £8.5 million.
If the NHS were structured and financed under the old Labour system, to which the hon. Member for Peckham seems to wish to return, my constituents would have remained in a queue for many years. It is now clear that the Conservative Government, with their new and imaginative PFI system, are taking our hospital project forward. We are already seeing the benefits of the NHS reforms. Fundholding general practices in my constituency have been successful beyond our wildest dreams.

Madam Deputy Speaker: Order. I am sorry to interrupt the hon. Gentleman. I am always happy to have passing references to local matters, but he seems to be moving a long way from the subject of the Bill. The Bill concerns winding things up rather than starting them off, which appears to be the main subject of his speech.

Mr. Arnold: The concern is that, if either of the two trusts to which I have referred—which will develop our general hospital or our community hospital—faced the risk of being wound up and of leaving creditors with no one to pursue, the contracts for the PFI and for supply of hospitals could be in doubt. That is why the Bill is so relevant. I am outlining my constituents' hopes, which could not be fulfilled under the old structure of financing the NHS, to which the Labour party remains wedded. The fulfilment of those hopes must be guaranteed by the passage of the Bill, which would ensure that proper financial security exists for PR contractors and for suppliers. That is vital.
That is the reason why I was distressed to hear the Opposition spokeswoman time and again attacking the PFI. Perhaps somewhat naively, my constituents and I took to heart the Leader of the Opposition's comment:
The PFI is right in principle."—[Official Report, 28 November 1995; Vol. 267, c. 1077.]
I thought that this matter might have gone out of the party political arena, but the performance of the Labour spokeswoman for health threw all those hopes out of the window by seeming to bring sterile party political battles into it. We heard quoted her comment to the Birmingham Health conference on 13 January this year:
I don't call it a Private Finance Initiative, I call it a privatisation initiative.

What is that supposed to mean? It appears to be hostile to the PFI, which is born out by the fact that the Labour party intends to vote against the Bill tonight.
We want the PFI. My constituents will understand and share my view that, apparently, we need a Conservative Government to take the PFI forward this and the other side of the next general election. Our hospital dreams depend on it. The PFI and all the legislation needed to make it a reality is vital to my constituents because, in respect of hospitals for north-west Kent, the PFI is turning dreams into reality.

Mr. Simon Hughes: The debate is prompted and motivated, and the Bill has been introduced, for two obvious reasons. There is the theoretical, academic reason, explained probably six times by the Secretary of State for Health in his speech. It is that the Secretary of State of the day might not pick up the tab if a trust were to be dissolved and left with debts. The real reason, however, is that the problem came to light once the Government started going at much greater speed than ever before down the private finance initiative road. That was the explanation. The Secretary of State was honest about it. The current law allows discretion for the Secretary of State to say, "No, sorry—I am not picking up the tab."
Clearly, dealing with the "not picking up the tab" point is important. In the part of the world from which I come, the South Thames training and enterprise council went to the wall a year and a quarter ago. The Secretary of State for Employment, as he then was—he is now Secretary of State for Defence—suddenly wound it up, and a number of people who had traded with it in the belief that it was an agent of Government were left whistling for their money: training providers, local colleges and local firms. Many never received their money.
The Government did the dirty. They claimed their entitlement, saying, "We are the preferred creditors, so we shall take our money first even if others must suffer." I know all about agents, or agencies, of Government that claim to be supported by the Treasury or other Departments, but are eventually shown to be other than what they claim. With members of the other main parties, I went to see the Secretary of State, and he told us that the same applied to local councils. If a council went to the wall, the Government could say, "Sorry, but we will not bail you out." A council could be declared bankrupt, but the Government would not be obliged to support it.
I believe that the Government should be responsible for Government agencies. Theoretically, therefore, I am happy for the law to be amended. But this is not just a theoretical issue—it is a practical issue. We are having this debate because the Government have clearly said that they cannot sign the PFI contracts—as emerged in the Select Committee on 4 March, none has yet been signed—unless assurances can be given that people will never be left whistling for their money. The reason is clear: the private sector partners will not play ball. I understand why they do not want to find themselves in bigger difficulties than they would otherwise.
That raises a general question that I have raised in the House before. When and where did Parliament decide that the national health service should become dependent on the private finance initiative in regard to capital projects?


Unless I missed it, or it was written in invisible ink, nothing to that effect was included in the manifesto on which the Conservatives fought the last general election and, under our funny electoral system, won the election despite the fact that most people voted against them.
Since then, there has never been a formal statement of Government policy telling us that, in future, the capital building programme of the NHS will be funded by the private sector. The Government have allowed the PFI to creep in. They have said that they intend to rely on it in more and more ways, but they have not been so straightforward with the House. It is clear—this, too, emerged in the Treasury Select Committee—that, according to the original proposal put to Parliament by different Departments, the PFI was a way of raising extra money: it was not intended to serve as an excuse for substituting private for public money.
As was clear from the public expenditure statements made to the House at the end of November, there will be a 12.7 per cent. reduction in next year's publicly funded NHS capital programme. The Secretary of State confirmed that fact to the Select Committee. Although he did not say so explicitly, he was honest enough to accept that in reality the PFI is unlocking private money to make up for the fact that the Government are not committing public money to the hospital building programme.
My colleagues and I have no theological objection to the use of the private sector to supply public services. That is done every day of the week by, for instance, education authorities buying books for schools. We do, however, object to discovering suddenly that the proposition on which we had relied—that the hospital building programme, and other NHS capital projects, would be publicly funded—has been replaced by a proposal to cut public funding and replace it with private finance. I shall not vote for that unless we have tested to our satisfaction the proposition that we are to get better value for money—a proposition which, as recently as a year ago, was not supported by the Treasury. A year ago, the Treasury was still advising the Department of Health that the PFI would probably prove more rather than less expensive.
Let us suppose that a private sector consortium was commissioned to build a hospital. Let us also suppose that it was assumed that the private sector would use the hospital for 50 years, and that a 50-year rental agreement was drawn up. According to previous Treasury advice, even if the hospital was transferred to the public sector at the end of those 50 years for no more than the rental payment, the payments spread over that period would amount to more than would be involved in borrowing to spend now. We all know why that is: it is cheaper for the Government to borrow money than for anyone else to do so, because they are the most secure of all borrowers. It had always been assumed that they were the best borrower, because they obtained the best rates. If the Government were going to borrow to fund an NHS capital building programme, that was the cheapest way of providing the service.
When I have seen the evidence that proves what the Secretary of State now asserts, which is contrary to Treasury advice given less than a year ago—that it is cheaper for the private sector to build hospitals in Amersham, Scotland, the east end of London, on the south bank of the Thames and in Carlisle, for instance—I shall find it difficult to argue that that is not in the interests of

the taxpayer and the consumer. But it has not been proved, and yet again we are putting the cart before the horse. We are cutting NHS capital expenditure. There is no argument about that: the Secretary of State has admitted that there is to be a 12.7 per cent. cut next year, and according to the Chancellor's Red Book over the next few years we shall see the largest relative reduction in expenditure on the health service capital programme since 1948.

The Parliamentary Under-Secretary of State for Health (Mr. John Horam): No.

Mr. Hughes: Yes, we shall. Since 1948, public expenditure on the health service has grown regularly, year on year. It has gone up and down, but the overall graph has risen. Over the next few years, as projected by the Chancellor, we shall see the greatest slowdown ever in the commitment of public capital expenditure to the NHS, and in its expansion. I can show the Minister the figures, which are in the public domain.
I shall not vote for such action, because I believe that the case must be proved before we sign up to it—and I will not sign up to action for which the motivation is driven not by accountancy or a desire for value for money, but by the approach of a general election which must be preceded by the delivery of tax cuts. The Chancellor delivered tax cuts last November; we opposed them, Labour abstained and the Government voted for them. He wants to deliver tax cuts next November; I assume that we shall again vote against them, Labour will again abstain and the Government will again vote for them. The only way in which the Chancellor can do that is by keeping down public expenditure, which means that he must transfer not just the risk but the cost to the private sector. A year ago, the Treasury said that that was the more expensive option, and I do not believe that those advisers have suddenly changed their minds.
I would be very happy with a procedure whereby the Treasury and Health Select Committees and the House took evidence from everyone concerned and subsequently decided whether the PFI was cheaper for hospital building, the provision of clinical services or a mixture of the two. That is what good legislation and policy should mean. But I am certainly not happy to sign up to something that says, "Last year it was bad news; this year it is good news." We have seen no evidence to show that anything has changed. I am less happy because, while the national health service is supposed to be run democratically, trusts meet and take decisions in secret and are accountable to nobody in the public whom they serve. They are accountable only to civil servants and the Secretary of State for Health.
The decision-making process to select the consortium to which a hospital project will go is not out in the open. Nor will a privately financed project be demonstrably cheaper—over 50 years, it may be more expensive. No one has agreed to that process apart from people who meet in secret behind closed doors. The public have not agreed to it. The Secretary of State told the Select Committee that financial deals with the private sector would not be approved unless those involved on the clinical side agreed. Who is to say to how many people, and to whom, the Government will talk? I have had plenty of experience of the Secretary of State talking to people in the health service and saying that they have agreed when they have not or when some have agreed and others have disagreed. That is why there is a risk.
I have a practical suggestion about how we should proceed. I do not want a system that tells me after the event whether a project is good value for money but one that tells me that before the event. I do not want a civil servant, the accounting officer, to report privately to the chief accounting officer, the chief executive of the NHS, through documents that the public cannot see and say whether a project is good value for money. I would be happy for an independent person such as the Comptroller and Auditor General to do that job. If his office said, "Right, go ahead, it is cheaper, and you can go ahead because it is better value for money," the project should go ahead. However, until and unless publicly accountable independent people, not employed by the Government of the day, give that advice so that the public can see and hear it, we are being asked to sign up to an unacceptable proposition.
The Minister will know of the example of the proposals before the Guy's and St. Thomas' NHS Trust because it serves many of his constituents. Surprise, surprise—the trust has got a bit of a private finance initiative idea. The hon. Member for Peckham (Ms Harman) made the point well that the PFI is being used an excuse for further delaying things that were about to go ahead. South of the river, we were about to go ahead with an outline business case that had been worked out by the trust. We were told that it was ready to be the final business case, but it never quite saw the light of day.
It was a bit like snakes and ladders. Just as we were about to move off the square, we were told, "Sorry, you've got to down the snake marked private finance initiative." We have to go back to the beginning to find whether the proposal that was worked up as part of trust's public sector plan could be done more cheaply in the private sector. It may be true, as was said earlier, that there had been no development for six years at Norwich hospital, but the PFI means having to go round an extra loop, which may take a year or two, before getting back to where one started. There is no guarantee that anything will have been achieved because it may prove that it would be more expensive to use the PFI than to use the original public route. The real issue about capital programmes and capital spend in the health service is ensuring that there is an accountable way of getting value for money irrespective of whether projects are in the public or private sectors.
I was delighted when the right hon. Member for Horsham (Sir P. Hordern), the Chairman of the Public Accounts Commission, told me last Monday that the Comptroller and Auditor General will investigate what has been happening south of the river, where a building project for Philip Harris house and associated works that were originally to have cost £56 million are now scheduled to cost £157 million. They were originally due to be finished in 1993; now, if we are lucky, they will be finished in 1997. That is the sort of question that I want answered.
The Government commissioned a building which, three years ago, they called the flagship building of the national health service. Why we are now told that we shall have to spend another £112 million on a new building on another site to do work for which the building on which we have just spent £150 million is specially built and equipped? Those are the questions that my constituents

want answered. I am delighted that the Comptroller and Auditor General is to investigate them. I wish that he had been monitoring the system all through and made sure that projects, once money has been committed to them as being the best value for money, are seen through and that Government and officials behind closed doors do not suddenly change their minds about how to use buildings.
We will win the argument and prove that Philip Harris house should be used for its intended purpose. We will show that it will still be better value for money to use the building on which the money has been spent and not commit another £112 million somewhere else. I hope that the Government also realise that unless they agree, they will be throwing extra public money after that which they are already committed to spend.
Let us address the real questions, get the evidence out in the open and have an informed debate. We should not deceive ourselves that this is all about sharing risks. It is no more about sharing risks now, or in the future, than it has been in the past. Risks have always been shared. Whenever the health service commissions work from a private builder, there is a shared risk. If the private builder takes three years or goes bust, the project is covered by contracts and insurance. The health service was no worse off in that situation than it would be if a consortium and the health service, on behalf of the taxpayer, proposed to build or expand a hospital, clinic or other facility together.
I am happy to sign up to something which says that the NHS trusts should not suddenly leave people whistling for their money, but I am not prepared to do so without ever having been asked to approve the proposal that we replace public by private money and start moving the whole NHS capital building programme from the public sector to the private sector. Until and unless we are given some assurances about the way in which the health service is going and whether it is being openly and accountably managed so that we can see that we are getting the best value for money for everyone, we shall reserve our position on the Bill and vote for Labour's reasoned amendment. We shall not vote if there is a Division on Second Reading because we cannot approve a package deal that conceals more than it reveals.

Mr. John Whittingdale: Labour Members' speeches consisted mainly of a combination of synthetic outrage and scaremongering. I exclude the hon. Member for Southwark and Bermondsey (Mr. Hughes) from that charge. His was a more reasoned critique of the private finance initiative, although I do not entirely agree with what he had to say.
The Bill is largely a technical measure but nevertheless one of some importance. It is necessary to ensure the continuing success of the PFI in the NHS. The PFI already greatly benefits the health service.
Before the autumn statement in 1992, hon. Members will recall that Treasury orthodoxy was implacably opposed to the use of private capital on public sector projects. Almost any suggestion immediately fell foul of the notorious Ryrie rules, which were almost designed to ensure that the conditions set for privately financed projects were impossible to meet. I pay tribute to my right hon. Friend the Secretary of State for Health who, as Financial Secretary, had the imagination to ignore the mandarins and break free of the rigid Treasury constraints.


It was perhaps unsurprising that, to begin with, attention focused on opportunities to use private capital for transport projects because it is easier to create a stream of income from tolling which would give private investors their return on such projects. For services that are specifically free to the user, such as the NHS, it is more complicated to ensure the return on capital. However, the advantages of private sector involvement in the financing of capital projects are the same as in every other area of public sector provision. They include the opportunity to take advantage of additional skills and expertise, to gain access to new sources of capital and to transfer risk. Private sector involvement allows the NHS to share overheads and benefit from economies of scale.
There is no reason why publicly funded health care has to be supplied by publicly financed and managed hospitals. When the NHS takes on the design and construction of new facilities, it is exposed to risks that can impose costs and reduce efficiency. Anybody who has been involved in a construction project will know that there are 101 things that can push up the cost or throw out the timetable. The result is that more money has to be diverted away from patient care. The PFI allows those risks to be reduced and to be transferred to a private partner.
Since 1992, the PFI has taken root with the establishment of the PFI database in the health service and the requirement that all capital projects be tested to determine their potential for private sector input. The database significantly speeds up the process of matching NHS and private sector organisations with mutual interests, as well as providing a much wider range of potential partners from which a trust can choose. It also allows trusts to draw on the experiences of others in the NHS who have dealt with the private sector, to ensure that their knowledge and expertise are shared.
Already, considerable interest has been revealed and a number of projects are up and running. At its most exciting, the PFI allows the provision for NHS trusts of complete new hospitals, or significant parts of hospitals, funded by the private sector. But opportunities for private sector involvement in health care are by no means limited to the financing of capital-intensive hospital building projects. Indeed, a report commissioned last year by the London Implementation Group recommended that the only way to get privately financed primary health care centres built quickly in inner London would be to allow private health providers to both build and operate them.
In the first instance, trusts may concentrate on those assets and services that are not core functions, such as car parking, waste incineration, energy management, patient accommodation and hotel services, but other schemes may involve direct patient services that carry a risk of uncertain revenue streams, such as dialysis, day surgery and domiciliary services. The past three years have seen a gathering momentum so that, having started at the back of the field, the NHS is now out in front in making use of the PFI. So far, 45 PFI projects have been approved by the NHS executive, with a total capital value of more than £160 million. However, by the end of next year projects worth more than £1 billion will have come forward for assessment and approval.
Under this Government, an enormous amount is being spent on the health service—not just in current spending on patient care, but on capital projects as well. My own constituency is served by two general hospitals, each of

which is seeing substantial investment in the expansion of facilities. My constituents in Maldon are served by Broomfield hospital in Chelmsford. I am pleased to see my hon. Friend the Member for Chelmsford (Mr. Burns) in the Chamber. He, too, takes a close interest in the progress of that hospital. When he and I visited it recently, we saw that work had just started on a £25 million development. This will include six new theatres, a 20-bed burns unit with its own operating theatre, a 20-bed children's ward and six adult wards for plastic surgery, orthopaedic and rheumatology services, not to mention a new pharmacy, a new hydrotherapy pool and a new medical records library.
The hon. Member for Peckham (Ms Harman) referred to the Governments's hospital building programme as castles in the air. Those projects are no castles in the air—they are in train and will soon be available for patient care. When it is completed in two years' time, clinical space at Broomfield will be increased by more than 50 per cent.

Mr. Simon Hughes: I do not doubt what the hon. Gentleman says. My brother, who is his constituent, will no doubt be grateful for the hon. Gentleman's work. However, can he say with his hand on his heart that he has been shown evidence to prove that over the whole of the costing and the payback of the project—or any other project—it is unarguably considerably cheaper than any other route that might have been followed?

Mr. Whittingdale: I am interested to learn that the hon. Gentleman's brother is my constituent. I shall regard it as a specific challenge to persuade him to vote for me. I would be happy to have greater analysis. I believe that the private sector is capable of building and running hospitals more cheaply than the public sector. There is already some evidence to support that. However, it is early days with the PH and I should be happy to see more work done to try to establish the precise facts. We are still in the early stages of private sector involvement in the building of hospitals for the NHS. I hope that there will be greater analysis in the coming months. I believe that it will show that the private sector is capable of building hospitals more cheaply and efficiently than the NHS.
It is not only my Maldon constituents who are benefiting from new capital facilities in the NHS. At Colchester general hospital, which covers the other end of my constituency—

Madam Deputy Speaker: Order. Before the hon. Gentleman continues, I must reiterate a point that I made earlier: hon. Members' remarks must be related to the Bill and not be simply a general survey of the NHS in an hon. Member's constituency.

Mr. Whittingdale: I entirely take that point, Madam Deputy Speaker. However, at Colchester general hospital in particular, it is the PFI that allows the project to go ahead and therefore benefit my constituents in future. Without the provisions of the Bill, I believe that there would be a threat to the continued success of the PFI, which then might result in such projects not proceeding.
At Colchester general hospital, work is far advanced on a new obstetrics, gynaecology and orthopaedics unit. The next part of the £30 million development programme is


the re-provision of acute care for the elderly and rehabilitation facilities. That is being undertaken under the PFI at a cost of about £9 million. It should be in place next year. In due course, we can also look forward to a brand new cancer unit in Colchester.
For years, my constituents have lost out because resources have been sucked away from north Essex and into London. As a result, we have suffered from some of the longest waiting lists in the country. At last, that problem is now being addressed and this year the North Essex health authority has been given a £11.5 million increase over and above inflation. However, the real proof of the Government's commitment to the NHS in north Essex is the creation of, in effect, two new hospitals in Colchester and Chelmsford.
Despite the enormous amounts that are being devoted to health care, demand for new facilities is growing continuously. Improvements in medical technology and increasing demand for health care from an aging population mean that resources will always be under pressure—and when budgets are squeezed, it is usually the capital programme that bears the brunt. The PFI can increasingly relieve the NHS of the burden of capital expenditure. This Bill, by clarifying the legal and constitutional status of NHS trusts, will remove one of the last inhibiting factors which may hold back private investors from taking advantage of the PFI.
What is extraordinary is the attitude of the Opposition to the Bill. In the past, they have said that they support the use of private finance for public sector projects. Indeed, as we have heard, they have even attempted to claim that they originally suggested it. The right hon. Member for Sedgefield (Mr. Blair) is on record as saying that they have supported the PFI and, in many ways, have been advocating it. It therefore comes as something of a surprise to find that they are opposing the Bill.
The hon. Member for Peckham may not have caught up with the policy of her own party. Like the internal market, the purchaser-provider split, trust hospitals and, apparently, even general practitioner fundholding, she has not realised that it is another area where the Labour party is being forced to muzzle its previous opposition because of the obvious success of and support for those policies. It is certainly possible that she may not have understood the evolution in Labour party thinking, for on the very same day as her leader was expressing his support for the PFI, she was on the "Today" programme saying that the PFI was a new trick to privatise the NHS.
As is the case in so many other areas, the Labour party is in a state of total confusion: it knows that the public finance initiative is working, but it cannot bring itself to say so. The Labour party's ideology prevents it from admitting that the private sector is ever capable of doing things better than the public sector. We are entitled to know whether the Labour party would abandon the PFI, and stop the construction of the hospitals and the facilities that are being built by the PFI. Would the Labour party spend taxpayers' money to replace the investment which is now being financed by the private sector? What is the price tag on its ideological hostility? We have not received any answers to these questions during the debate.
The Bill is a sensible measure: it will ensure that the national health service continues to meet its debts, it will reinforce the confidence of private investors to participate in NHS capital projects and it will allow the PFI to continue to help us build an even better health service.

Mr. William O'Brien: The hon. Member for Colchester, South and Maldon (Mr. Whittingdale) obviously did not listen to my hon. Friend the Member for Peckham (Ms Harman) when she addressed the House and explained how the Labour party looks upon the public finance initiative programme, in this instance involving the national health service. My hon. Friend made it clear that the Labour party believes in a partnership arrangement between the public sector and the private sector.
The fact that there is no partnership arrangement with the PFI in the national health service makes us suspicious of what the Government plan. Conservative Members have said that they agree that the financiers should design, plan, build and run the hospitals. If that is not privatisation by the back door, what do Conservative Members require to prove to them that this is a privatisation of the national health service?
I draw hon. Members' attention to why I requested to speak in the debate. The Bill is of paramount interest to my constituents, in particular, and to the people of the Wakefield district, in general. Pinderfields general hospital, in Wakefield, is in my constituency. The doctors, the nurses and the support staff of the hospital are dedicated to the service that they provide and they deserve more help from the Department of Health.
I could have included the chief executive in the list of dedicated people at Pinderfields general hospital, but he left his post on Friday last week. I understand that the director of medical services is currently acting as the chief executive, in addition to performing his normal duties. The director was due to retire in July, but he has agreed to continue to work for a further 18 months, if required.
We are witnessing a further chapter in the Pinderfields scenario—a scenario that has continued for a considerable amount of time. Perhaps the Under-Secretary of State for Health, the hon. Member for Orpington (Mr. Horam), when he replies to the debate, can shed some light on what is taking place in Pinderfields general hospital trust.
I draw hon. Members' attention to some of the conditions under which the staff of Pinderfields must work and under which patients receive treatment. If there were a transfer of residual liabilities, a large area of Pinderfields general hospital would be worth very little. A number of the wards at Pinderfields general hospital were provided in 1940 for the wounded personnel of Her Majesty's forces. Approximately 30 temporary buildings were put into place as a provisional hospital—at that time, they were called the huts. The estimated life of the huts—with care, attention and maintenance—was 25 years. Many of the huts are still providing places for patients: 56 years after they were built and more than 30 years after what was estimated to be their useful life.
In 1949, I spent three months in H ward of the hospital because of an accident in the mining industry. At that time, the wards were well maintained, clean and well serviced. They fulfilled a useful purpose. Those wards are now residual liabilities. Over the past 20 years many


promises have been made on the provision of a new hospital on the Pinderfields site to replace the 56-year-old temporary buildings.
A great deal of money has been spent trying to keep the huts at a standard fit for people to receive treatment and for people to work. They have had to make do and mend. On a number of occasions, we have been promised a new hospital, but, as yet, no provision has been made. The huts are built on a gradient and transferring patients on chairs and on trolleys can be a task. This is part of the legacy of the development that took place almost 60 years ago.
A new hospital is needed at Pinderfields. Additions have been made to the general hospital in the form of a new accident and emergency unit, and maternity facilities were transferred from Manygates health clinic in Wakefield. We have been told that there could be further transfers of that maternity service away from Wakefield. This issue is causing great concern to many of my constituents and to people in the Wakefield area in general. The accident and emergency unit and the maternity unit rely on some of the old premises to which I have referred.
Wakefield district is served by two general hospitals: Pinderfields and Pontefract. The latter is currently performing well, and it is fulfilling a most demanding and useful purpose. A few years ago there were eight to 10 hospitals in the Wakefield area, but now there are only two. Last year it was suggested that a new hospital could be built on a greenfield site to replace the existing two hospitals. That suggestion was dropped as a result of pressures from local people—the indigenous population—because they could see problems with closing the two hospitals and with the siting of a new hospital.
We have been advised that at Pinderfields general hospital there will be a £60 million replacement of the old huts and new buildings will supplement the existing and traditional buildings. We have also been advised that between £9 million and £12 million will be spent on Pontefract general hospital. Who will provide the capital? The Government say that it must come from the private finance initiative—and that is why we have this Bill.
We have been informed that the private sector will not sign contracts because of the existing laws. As has been pointed out by the Secretary of State and by my hon. Friend the Member for Peckham, under the law as it now stands, when a trust ceases to exist the Secretary of State need not accept the liabilities of the failed trust, including any liabilities under the PFI contracts. The Bill will resolve the problem of the private sector, but it will create impossible problems for the public sector—in this case, the national health service. It requires the Secretary of State to stand behind liabilities over which he has no control, which may total £5 billion, although we have heard that the figure might increase to £10 billion. That is the magnitude of the problem underlying the assurances that the Bill would give the private sector.
Pinderfields Hospital NHS trust wishes to enter into a PFI contract to build the new hospital. I ask the Secretary of State or the Minister, what is our chance of having a new hospital in the Wakefield area? Too many broken promises have been made, and there is little hope of new facilities.
What will the PFI partner demand from the hospital trust? Will the Secretary of State ensure that the PFI benefactor will not demand to be responsible for

employing cleaners, for heating supplies and for the back-up services and responsibilities of the new hospital? We are informed that there might be demands in the PFI agreement for the PFI to engage people and run the hospital as an agent on behalf of the trust.
May we have clear, decisive answers to my questions and those asked by other Opposition Members? When can we have a new hospital, and will it be run and administered by the national health service with no strings attached to the PFI agreement?
The position in Pinderfields and in Wakefield is unusual because the Pinderfields site covers a substantial tract of land, owned by the trust, which could be developed for housing and commercial undertakings and is of value—

Mr. Deputy Speaker (Mr. Michael Morris): Order. I have listened attentively to the hon. Gentleman. This is a Bill about the totality of the PFI and the covering of potential debts. It is not appropriate to go into the detail of the landholdings of a particular hospital.

Mr. O'Brien: I was arguing that the liabilities mentioned in the Bill include liabilities that are of value to the PFI developer. That aspect of PFI development worries many people, because there are assets that might influence an agreement.
On that site is the old Stanley Royd hospital, which would be included under the heading of liabilities in the Bill but is a valuable area of land and buildings. If that is included in the liabilities, it will be a substantial incentive to the PFI partner. I draw attention to that background because, if that area were of value and were valued, the PFI would make little effort to raise money because the money would be there in buildings and land, which are now available for disposal.
Why do we need a PFI in the Pontefract and Wakefield area when all those "liabilities" that are really assets are available to the NHS? Why do we need a private sector partner when the NHS has those valuable assets at its disposal? Who are the people in the NHS and the trusts, representing the people of Wakefield, who would offer our hospital services to private money-lenders when valuable public assets are available?
The PFI is privatisation in the form in which it has been presented tonight, and the Bill is intended to prop up the private sector. Why must we proceed down that road?
At present, we have two trusts and two hospitals. We are told that the two trusts will merge into one—each trust will cease to operate and a new one will be created. Problems are inherent in such an arrangement. There is much suspicion about the proposal. We are told that there will be a three-month consultation process before the new trust can be formed.
I draw the Minister's attention to a letter that was sent to the Secretary of State by the chairman of Wakefield community health council, in which he drew attention to the practices of previous Administrations. He said that members of Wakefield CHC are extremely concerned that promises that were made when previous Administrations were changed have not been fulfilled. The letter explains the anxieties of many people in my constituency—

Mr. Deputy Speaker: Order. Unless the CHC especially refers to the Bill, this sort of contribution is not


in order in the debate. It is fair enough to use the example of the hospital in the hon. Gentleman's constituency to elucidate the main elements of the Bill, but not just to record what the CHC said on a previous occasion about that development.

Mr. O'Brien: Mr. Deputy Speaker, I am drawing attention to the lack of confidence in the consultation procedure that we are advised must be undertaken. If the Secretary of State and the Minister read carefully the letter of 6 March from the chairman of the CHC, they will understand why, in view of what happened previously, people in the Wakefield area are suspicious of the proposals to build a new hospital under the PFI and to change the hospital trusts.
Unless the Minister can give assurances tonight about the issues that I have mentioned on behalf of my constituents and the people who depend on the services of Pinderfields general hospital, and allay their suspicions, we shall not have the confidence that one would expect when debating such a Bill.
Because of the experiences mentioned by the chairman of the CHC and other people in the Wakefield area, I believe that the reasoned amendment tabled in the name of Labour Members should be supported.

Mr. Peter Luff: Mr. Deputy Speaker, I apologise to you and to the House for not being in the Chamber for the opening speeches; my parliamentary duties elsewhere, including attendance at a Delegated Legislation Committee, meant that I could not be here.
I am very anxious to speak in the debate because I regard the passage of the Bill as crucial to the interests of my constituents, in bringing about the construction of a new hospital in Worcester. If the hon. Member for Normanton (Mr. O'Brien), whose speech was more reasonable than those of some of his colleagues, really wants a new hospital to be built in his constituency soon, as he says, he should reconsider his voting intentions, because a vote for the reasoned amendment and against Second Reading would further delay the hospital's construction. I am anxious to avoid that in my case, and the hon. Gentleman should be anxious to avoid it in his constituency.
It is a shame that the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) marred a typically effective and detailed contribution by his extraordinary attack on my right hon. Friend the Secretary of State. To accuse my right hon. Friend of indolence and ignorance—I believe that those were the words that the hon. Gentleman used—is like accusing the hon. Member for Bolsover (Mr. Skinner) of being a member of new Labour, as it is just about as implausible. I am sorry that the hon. Gentleman marred his contribution by such comments.
I was also sorry to hear the speech of my hon. Friend the Member for Colchester, South and Maldon (Mr. Whittingdale) as, in his fine contribution, he said many of the things that I had been hoping to say in my speech. [Interruption.] I hear cries from the Opposition Benches that my hon. Friend was reading from a central office brief. I can let Opposition Members into a secret: I

have seen that brief and I know that my hon. Friend was not reading from it; he was making his own speech—for which I pay tribute to him.
The Bill is genuinely technical. It is effectively a one-clause Bill for each hon. Member. Clause 1 is for hon. Members from England and Wales; clause 2 is for hon. Members from Scotland; and clause 3 is for hon. Members from Northern Ireland. Each hon. Member regards the Bill with his or her own constituency in mind and sees it as a one-clause Bill. It is almost a two-phrase Bill. Clause 1 states that the Secretary of State
must exercise his statutory powers to transfer property, rights and liabilities of the body so as to secure that all of its liabilities are dealt with.
The last few words of that phrase,
so as to secure that all of its liabilities are dealt with",
go to the heart of our consideration of the Bill; they also go to the heart of the future of the PFI in the national health service.
The notes to clauses, which were helpfully provided by the Department of Health, clearly state what the Bill is about. The notes state:
The policy objective is to ensure that, if a NHS trust is dissolved or a health authority or special health authority abolished, its liabilities are transferred to another specified NHS body, or the Secretary of State. This is to ensure there are no residual liabilities left outstanding. The objective is to assure those who contract with such NHS bodies that liabilities will not be extinguished in the event of a NHS trust, health authority or special health authority ceasing to exist.
The next paragraph of the notes is important:
To date all liabilities of trusts have been transferred elsewhere on dissolution, and even without this legislation it is most unlikely that the Secretary of State would not do so in future. This change, however, removes all doubt on the matter.
If I understand the Bill correctly, it simply makes it clear that the taxpayer stands, as he or she should, firmly behind all the liabilities of the national health service. To that extent, the Bill should not attract any controversy in the House this evening. What it means in practical terms is tremendously important. It provides the reassurance that is crucial to all those who trade with the NHS, from the smallest retailer—the provider of the odd bit of stationery or greengrocery—to the largest PFI contractor. There will always be someone who is prepared to honour the NHS's side of the contract.
Does it matter whether we pass the Bill? After all, the notes on clauses state that, in practice, all liabilities have so far been transferred elsewhere on dissolution and it is most unlikely that the Secretary of State will do anything different in future. But the Bill matters fundamentally to the future of the PFI, because those who stand behind the PFI contractors—those who will undertake the financing of projects—attach huge importance to the provision. Therefore, it must matter to every hon. Member who cares about the future of the NHS and who shares the vision, which I thought was common across the House, of the need to develop a more effective partnership between the public and private sectors.
What the PFI does—and will be able to do only if the Bill secures its passage—is to provide more capital than would otherwise have been available for the NHS. We can play word games about whether that money is additional to the overall levels of funding, but, ultimately, the Bill will enable an overall increase in the capital schemes in the NHS.
About 25 large-scale NHS/PFI schemes have recently been advertised in the Official Journal of the European Communities—all the schemes are worth more than £25 million. I am afraid that I have not done the arithmetic in my head, but the resulting sum of money is clearly large. I am glad to say that one of the schemes that has been advertised in the journal is for the new Worcester district general hospital.
If only half those 25 schemes were to succeed and come to fruition, that would still represent a huge increase in the capital programme of the NHS. That capital programme is significantly higher now than it was when the Government came to power. There has been a huge increase in the capital programme of the NHS, plus massive increases in current expenditure on it—there have been massive real terms increases. I think that I am right in saying that there has been an increase from about 4.7 per cent. of gross domestic product in 1979 to more than 6 per cent. now. The capital programme could be threatened if the Bill did not secure its passage.
The working of the PFI depends on the substantial transfer of risk to the private sector. What sort of risks? The obvious risks are in design and construction, and in the costs associated with the commissioning of any new facility. There are also risks involved in the costs of operating that facility; there is a risk that, during the facility's lifetime, technological obsolescence may occur. All those risks need to be transferred to the private sector as part of the PFI, but the Bill deals with one risk that need not be—and should not and could not be expected to be—transferred to the private sector. If I have understood it correctly, that risk is that the Secretary of State might rob a trust of its hospital and leave all the liabilities behind. That risk would clearly worry any reasonable-minded financier or lawyer.
The Bill is important; an article in today's edition of the Financial Times states:
PFI hopes hinge on emergency bill".
I do not know to what extent it is an emergency Bill, but I agree with the first half of that: PFI hopes do hinge on the Bill. I shall be fair and even-handed; the article states that while some
analysts are not yet convinced of the long-term viability of PFI in the health sector, most seem to accept Mr. Dorrell's assurances on the bill. Mr. Kingsley Manning, managing director of Newchurch and Co, a consulting firm involved in several health PFI projects, said that the risk transfer in PFI was never meant to refer to trust liabilities.
The article quotes Mr. Manning as saying:
The risks that the government is attempting to transfer through PFI are those that the private sector operators would be expected to have some control over, like volume, activity and performance … The new legislation just puts health in line with other government departments.
It is as simple as that: the Bill simply puts the Department of Health in line with the other Departments of State that use the PFI.
The PFI does not seek to privatise the health service. Opposition Members' attitude to the Bill and the PFI is confusing. I sometimes hear them claim that they invented the PFI and I sometimes hear them seek to undermine it—often on the same day, to different audiences. On 28 November last year, the Leader of the Opposition, the right hon. Member for Sedgefield (Mr. Blair), said from the Dispatch Box:

The PFI is right in principle. We have supported it, and in many ways we have been advocating it."—[Official Report, 28 November 1995; Vol. 267, c. 1077.]

The right hon. Gentleman should let his vote follow his voice and support the Bill this evening—it is crucial to the future of the PFI.
At a conference in London in May last year, the right hon. Member for Kingston upon Hull, East (Mr. Prescott), the deputy leader of the Labour party, said:
I have long been associated with arguing for public-private partnerships … I made the case for private sector involvement in public investment.
However, only four or five weeks later, the right hon. Member for Derby, South (Mrs. Beckett) said from the Dispatch Box:
there is growing alarm at the way … in which the Government openly use the private finance initiative to privatise core … services."—[Official Report, 3 July 1995; Vol. 263, c. 23.]
Labour Members must make up their minds—and, with respect, they should decide to support the Bill, which will genuinely enhance the future prospects of the PFI. On 18 January, the hon. Member for Rother Valley (Mr. Barron) said:
We do not disagree with the PFI, how could we? It was Labour who first thought of partnerships between the public and private sector".
Perhaps he should have listened to the remarks of his hon. Friend the Member for Peckham (Ms Harman) only five days earlier at a conference in Birmingham, when she said:
I don't call it a Private Finance Initiative, I call it a privatisation initiative.
Labour Members seem to be saying two things but doing only one of them—that seems to sum up their position with regard to the Bill and the PFI.
The Bill is an essential underpinning of the PFI, which is the pragmatic way of introducing partnership into the national health service. The debate so far has focused too much on the issue of cost. Of course cost matters, but the hon. Member for Southwark and Bermondsey (Mr. Hughes) seemed to believe that the issue is only about cost. It is not. The benefits include additional capital funding, which will mean more projects overall and better cost control—so there is an element of discipline related to cost. The PFI will reduce the risk for the taxpayer and make better use of existing assets, as the hon. Member for Normanton said. I am sure that some imaginative ideas will come forward as part of the PFI bidding process in the health sector, about how to use the residual assets of NHS trusts.
My constituency case involves three sites, and I believe that the involvement of the private sector will assist us to make good use of them. The private sector will bring a more constructive and entrepreneurial approach to the issue, rather than the old, staid public sector approach. The PFI will shorten construction times by introducing innovations in the way in which hospitals are built. That will bring real benefits. We have seen how, in the Prison Service, private contractors can build more quickly than builders were able to under the old public sector contracts.
There will be innovation in its fullest sense. I have hinted already at innovation in the construction process and at making better use of existing assets. There will be innovation also in service provision. Those benefits could be jeopardised if the Bill did not receive a Second Reading, because the flow of PFI finance to big projects would dry up immediately.
Much of what I have heard in the debate leads me to believe that Labour Members have reverted to type—to old Labour—in opposing the Bill. The hon. Member for Normanton referred to "private moneylenders"—which is a particularly graphic and vengeful phrase. That old hostility has come through the debate with stark and startling clarity.
The fact that innovation will be put at risk if the Bill does not receive a Second Reading is best illustrated by what is occurring in South Worcestershire. The South Worcestershire community NHS trust has co-operated with a local fitness centre to provide a £250,000 scheme that will benefit the whole community and provide new services and revenue to the trust. My right hon. Friend the Secretary of State visited the facility on Friday last week, and he was deeply impressed by what he saw. If we do not pass the Bill, that scheme—which it is hoped will be replicated throughout the trust area—will face unnecessary difficulties and uncertainty in the future.
The trust has teamed with a health and fitness company to build a new exercise and fitness studio on the hospital site. The company, One-on-One, is working in partnership with the Evesham community hospital to help meet "The Health of the Nation" fitness targets. A press release issued last year states:
Seven-and-a-half thousand square feet of brand new exercise and fitness studios with the very latest equipment will be ready for use in the autumn … But it's the alliance with the hospital that makes the health-promoting difference. Hospital patients will have access to new facilities and the award-winning 'One-on-One' team—they've gained a coveted British Standards/ISO 9002 Award for Quality—will be working as part of a wider NHS team to help persuade people across the Vale"—
that is the Vale of Evesham—
to become more physically active".
That imaginative partnership scheme is the result not just of a partnership between the public and private sectors—I do not wish to pretend that it is as simple as that. More than one public sector body is involved: the public health department, the district council and the trust have forged an alliance that will benefit my constituents and those of my hon. Friend the Member for South Worcestershire (Sir M. Spicer).
That PFI scheme will provide innovative facilities for hospital patients at no cost to the trust. Unless we pass the Bill, innovative schemes such as that—which share risks and benefits between the public and private sectors and which have proved in practice to bring enormous benefits to both parties—will be put at unnecessary risk. I shall not weary you, Mr. Deputy Speaker, by listing the services that the scheme will provide.

Mr. Whittingdale: Go on.

Mr. Luff: No, I shall not as that might try your generosity, Mr. Deputy Speaker. Some of the schemes are clearly aimed primarily at the private sector aspects of the fitness centre: fitness testing, health and fitness for 50 years plus, sports injury rehabilitation and so on. However, there are some mainstream health facilities, including osteoporosis and arthritis care; respiratory, cardio pulmonary health and fitness and so on. That is the kind of innovation that can flow from the injection of

private finance into the NHS, and it will be threatened if the Bill—which goes to the heart of the private finance initiative—does not secure a Second Reading.
The Bill is very important for all those who live in south Worcestershire. The people have campaigned for 30 years for a new hospital to replace the current three sites—one of which is the second oldest site in England where patients are still treated. The British Medical Association was founded on that site in Worcester many years ago. My predecessor, Lord Walker of Worcester, turned the first sod of the new hospital site in August 1993, but nothing has occurred since then. There has been a long battle to persuade the region about the business case for the hospital.
We now face the prospect of an excellent hospital with outstanding core medical facilities and a flexible number of beds. Everyone would benefit from the new facilities that the development would provide. The new Worcester hospital, for which my predecessor and I have campaigned so vigorously, must not falter because of a simple, technical issue that the House can resolve easily. That is why the Bill is important to me, to my constituents and to all those who live in south Worcestershire.
The private finance process is progressing well in Worcestershire: it is an example to other trusts round the country of how to achieve aims quickly and professionally. I am not prepared to let down the trust's hard-working managers and medical staff by allowing a problem at national level to thwart their attempts to advance the scheme quickly.
We face serious issues in creating the right commercial and organisational arrangements between the private sector and the NHS. However, the Bill clears away the main obstacle. There is an excellent team in Worcester, with a new chief executive, which is committed to making the private finance process work. It wants to pioneer a sensible deal that will combine the best of the national health service and the private sector, to bring the sorts of innovations that we have seen in Evesham in the past few months.
The trust has put out invitations to tender to three short-listed consortiums—Laser, Bovis and Bryants—and the bids are due to be received by 10 July this year. If all goes well—if there are no hiccups and the Bill secures its passage—the contracts should be signed this year.

Mr. Stephen Timms: Notwithstanding what the article in the Financial Times said this morning, is the hon. Gentleman aware that the Secretary of State told the Treasury Select Committee that the Bill was not needed in order to complete those PFI deals?

Mr. Luff: I am at liberty to disagree with my Front Bench—that is one of the privileges that Back Benchers have. I think that the Bill is important, and that is also the view of those to whom I have spoken in the NHS. They think that their financiers will require the security afforded by the Bill, and I am very happy to take their advice. I shall listen to my right hon. Friend the Secretary of State, but I believe that the Bill is important—and my local trust believes that also.
The contracts with the three consortia must be signed and every legal obstacle must be removed from their path. We must provide suitable health care to the people of my


county into the next millennium. Years of waiting can be brought to an end. The medical and clinical staff at the hospital deserve the full support of the House this evening, to ensure that the PFI helps them to deliver the highest-quality treatment for the patients whom they serve.
I looked at the reasoned amendment before the House and I despaired. It rests its case on the suggestion that there will be some
abuse of the Private Finance Initiative to advance privatisation of the NHS".
That is not how any Conservative Member sees it. We are committed to a public national health service, largely free at the point of delivery. If I thought that the Bill were a back-door route to the privatisation of NHS hospitals, I could not support it this evening. Private finance makes little or no difference to the basis on which health care is provided, but it will improve the quality of care, the range of services that hospitals can offer and the physical condition of hospitals.
Obviously, I hope that the debate will change the minds of Liberal and Labour Members and that the Opposition will be persuaded to drop their reasoned amendment and support the Bill on Second Reading. I want the Bill and I want my hospital, and I believe that the two are closely related. For narrow partisan reasons, I am tempted to hope that the Opposition stick to their guns and vote for the amendment and against Second Reading. If they do, they will have given me a powerful weapon in my county. when I explain what they have done to frustrate the construction of our new hospital.

Mr. Sam Galbraith: I was disappointed that the hon. Member for Worcester (Mr. Luff), who spoke for quite some time, did not speak before the hon. Member for Colchester, South and Maldon (Mr. Whittingdale). He could then have read out the Conservative central office brief and that would have stopped him using his usual tactics for prolonging the debate. They include repeating what others have said, reading out the Bill, its clauses and the notes to the clauses and then speaking at great length about his constituency.
Nevertheless, the hon. Gentleman and other Conservative Members confirmed two of my worst fears about the private finance initiative. First, whatever anyone says, it is in part a substitute for Government funding. It is no longer additional funding. Secondly, it is yet another method of slowly but surely privatising the national health service.
I remain of the view that, as far as possible, the NHS should be provided and financed by Government. That is not always possible. The potatoes are not always provided. To use the same analogy as the Secretary of State, tonight's measure might turn out to be the potato Bill.
It is important that the Government provide as much as possible, otherwise, bit by bit, the national health service is gradually eroded. Every time they erode a little piece, it becomes easier to erode another piece and that leads to the slippery slope, the black-white shift of philosophy whereby what was unacceptable yesterday becomes acceptable today, not because the principle has changed, but because there has been a slow but sure philosophical shift.
Having stated my position, I realise that there are practicalities. We live in the real world, there are constraints on the public sector borrowing requirement and Governments have to take account of such influences as interest rates. Therefore, there may be a case for considering the private finance initiative, provided that it is used in the interests of the health service, the risk is shared and the investment is to the benefit of all.
The more I look at it, the more obvious it becomes that the PFI is biased against the national health service and protects the private sector. The Bill completely removes all substantial risk from the private financier and places the liability back in our hands. It makes it easy for the private sector to become involved because there is no risk. The Bill gives what is virtually a carte blanche guarantee to the private sector. Trusts will be able to borrow money from the private sector and the Government will pick up the liability. I cannot see how that will not be set against the PSBR.
I understand that parts of the private finance initiative will not be set against the public sector borrowing requirement, but given the contents of the Bill and the projects that have been mentioned, I cannot understand how the Secretary of State can accept completely free and open liability for money borrowed by trusts through the PFI without setting it against the public sector borrowing requirement. Therefore, the private sector would incur no risk.
The hon. Member for Worcester said that some risks would be incurred. Those risks have been set out before, but they are minimal. First, there is a delivery risk. Contractors would be responsible for every aspect of establishing the service on time. Any contractor who is worried about delivering on time should not be in business. Secondly, there is volume risk, whereby the contractor cannot expect a guaranteed income. That is part of business. Even potato producers do not expect a guaranteed volume and they also incur a delivery risk. Thirdly, there are obsolescence risks. There is even a potential obsolescence risk with potatoes. Finally, there are economic risks, as contractors are no longer protected by inflation indexed payments. Those risks are part of normal contractual arrangements. They are normal business risks that anyone would expect.
The Bill does not seek to protect risks that anyone in business would expect. It seeks to protect almost open-ended liabilities incurred by trusts. They are not payments out of the current account; they are capital risks that will have to be set against the public sector borrowing requirement.
The PH has a long history. As the hon. Member for Colchester, South and Maldon, who read the Conservative central office brief, will know, it stems from the Ryrie rules that were established by the National Economic Development Council in 1981. They were designed to introduce private finance into nationalised industries, but they were very strictly drawn. They allowed public finance only if it was the cheapest option and the private sector carried the full risk. Those were two important criteria, and the Bill removes one of them. They were not viable because the private sector would not accept them on that basis, therefore they were amended over the years and eventually dropped.
They were replaced by the private finance initiative that was introduced in 1992 by the then Chancellor of the Exchequer, the right hon. Member for Kingston upon Thames (Mr. Lamont). He was quoted as saying that its purpose was
to remove the unnecessary obstacles to private sector investment in Britain's infrastructure.
He made sure that it was biased in favour of the private sector and that any risks would fall on the Government. That is what the Bill does.
The PFI comprises a number of features, including the possible involvement of leasing arrangements. As long as a project was shown to be profitable, it could go ahead without having to be compared with similar public sector activity, but there had to be a sensible transfer of risk. It was reiterated that the private sector must genuinely assume the risk. That proved to be unworkable, because the private sector would not accept the risk, so the Bill removes all risk from the private sector and places it once again with the Government and the taxpayer.
The private sector will fail to realise the potential. Conservative Members who made pleas for their constituencies and said that the PFI is the way forward have false hopes, as do the Government. The only way that they can succeed is if there is no risk to the private sector—I do not believe that the Treasury or any Government who believe in prudent finance could allow that to continue.
The PFI is more costly than the public sector. We all know that it costs the private sector more to raise finance than it does the Government, at 3 per cent. to 4 per cent. The only way in which that money can be recouped is by leasing charges or—as increasingly happens, and this is where the PFI produces problems—support services, leading eventually to medical services. In other words, that means the privatisation of the NHS, which is the Government's long-term aim.
Mr. Peter Puplett, a former economist with Tarmac, said about any charge:
On the one hand, it could be set too low and the private sector would not find it viable to finance the project. On the other, it could prove too high and the project would become a licence to print money. The latter risk is something feared by Treasury officials and ministers alike. It is the hidden handicap of the PFI and explains why so little progress has been made.
In other words, the Government cannot win—particularly if the Bill is passed. Yes, there are short-term advantages from the PFI and yes, immediate capital outlay is avoided—but the cost over the years, because of the charges inherent in the initiative, mean that in the long term, the PFI will be much more expensive. We will spend the rest of our lives paying for that which we apparently get for nothing today.
The PFI has no ability to establish priorities as to where the money goes, and with that goes a locked-in lack of flexibility. 'The Minister of State, Scottish Office who is on the Treasury Bench is responsible for the health service in Scotland, so he knows that Greater Glasgow health board leased under an initiative a large central office for its administrative services. Subsequently, the board's structure changed and evolution came about, and it no longer needed that office. Nevertheless, the board is locked into a 99-year lease, at massive cost, and it cannot

get rid of that liability. The contractor does not mind because it is getting the money. The liability has fallen back on us.
A company tamed Takare in Glasgow looks after the care of the elderly. That model is no longer appropriate and we want to change it, but we are locked into a 15-year agreement under a PFI. Flexibility has been lost, charges have been increased and we are heading slowly but inexorably towards privatisation.
The Secretary of State for Health has said that there will be no PFI in the clinical services. He tempered that today, saying that there will be no PFI where that is not wanted. We all remember the reassurance that hospitals would not be allowed to opt out to become trusts without clinical approval. That was all nonsense. The hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) knows that, despite the Secretary of State's remarks in this Parliament, the Scottish Office is seeking to involve private finance in not just building Stonehaven hospital and running the catering, portering and other services but in running every part of the clinical services. That is the reality in Scotland at present, and that is the PFI's hidden agenda.
The private finance initiative will not realise the hopes and dreams of Conservative Members in terms of new hospitals. It will produce long-term costs and lead slowly but inexorably towards privatisation of the NHS. For that reason, we are right to be wary of the PFI and to vote for the reasoned amendment.

Mr. David Ashby: I am pleased to follow the hon. Member for Strathkelvin and Bearsden (Mr. Galbraith), but his speech was typical of new Labour—full of sound and fury. The hon. Gentleman made all sorts of statements about the Bill being no good. but he gave no reasons and offered no sensible alternatives. That also is typical of the Labour party, which is always ready to oppose a measure but never seems able to offer anything constructive in its place.

Mr. Martlew: Will the hon. Gentleman give way?

Mr. Ashby: No, I am going on for the moment. I have just started.
I am grateful to be called today because I want to show that I may be down but I am not out.
I am astounded that the Bill is being opposed because it is a simple measure to ensure only an organisation to honour the national health service side of contracts, be what may. It does not demand much more than that, in providing confidence in the public sector. The Opposition's arguments would be much better put in Committee than now, so why are they opposing the Second Reading of this simple Bill?
I am reminded of a constituent who came to my surgery three or four weeks ago, who had experienced some trouble with a double glazing company. I will not give its real name but will call it Parliamentary Double Glazing. My constituent had paid a deposit and then, horror of horrors, he discovered that the firm had gone into liquidation. He submitted a claim to the receiver, but was told, "Sorry, there's no money." Then my constituent found that Parliamentary Double Glazing remained in


business, but was renamed Parliamentary Double Glazing Ltd. Mark 2. Then there will be mark 3 and mark 4. That experience gave my constituent no confidence in buying double glazing at all, let alone from Parliamentary Double Glazing. We have all heard of similar experiences in our surgeries.
What happens if trusts end and there are contracts to be fulfilled? Will there be nobody to honour those contracts and nobody to pay? Are we to have the National Health Service Parliamentary Double Glazing Ltd? Is that what we want? The Bill is highly technical and provides for the situation that I described. Why are the Opposition so keen to oppose it?
My hon. Friend the Member for Worcester (Mr. Luff) used a large number of quotations, starting with the Leader of the Opposition saying that the PH is right in principle, then the great whopper from the hon. Member for Rother Valley (Mr. Barron) that Labour had first thought of partnerships between the public and private sectors. There is no truth in that. There have been partnerships between those sectors from Conservative Governments for many a long day—but Labour likes, as always, to claim Conservative policies as its own. The Labour party loves to do that and it does it all the time, but the public will see through it.
The Labour party is like the emperor with his new clothes. But the problem is that the Labour party's background and credentials are completely different to ours. The Leader of the Opposition wears his new clothes. He came from Islington and was a member of the Campaign for Nuclear Disarmament and a left-winger so he is wearing new clothes. What is underneath the new clothes? The same body is still underneath. That is transparent, and exactly the same applies to the Labour party and to the speech by the hon. Member for Strathkelvin and Bearsden (Mr. Galbraith).
The hon. Member for Normanton (Mr. O'Brien) said that public assets would be used by private money lenders. We have also heard that the Bill would mean privatisation, but that does not square at all with the Labour party's argument that it is in favour of the PFI. It has said that it does not disagree with the PFI and has even claimed that it thought of partnerships between the public and private sectors.
There are two sides in the Labour party and that is why it opposes the Bill. There has been no change at all in the party. Behind new Labour, there is a whole army that would not, under any circumstances, want the private sector to help any public sector body, be it the health service or any other body. In the constituencies, there is a bigger army behind the wafer-thin new Labour. Underneath it all is old Labour.
I cannot help feeling—I think that many people agree—that the real truth about the Labour party is that it does not want the national health service to succeed. It wants to be able to say that the NHS failed under the Conservatives, when it has been a great success story. The Labour party wants to undermine absolutely everything that we are doing. Despite everything Opposition Members have said, they want to see the PFI fail. Tonight, the Labour party is pandering to its left wing, and that is why it is opposing the Bill.
New Labour is like my house in my constituency; it has an 1820 front, but behind the front it is 200 years old. Labour Members put up a front, but behind it the

house that they live in is the house of Keir Hardie and the unions, which brought so much disaster and unhappiness to this country. Disaster was caused by the over-powerful unions, especially in the national health service. The Labour party wants to return to its old ways. It pays only lip service to the direction in which we have gone.
I am delighted to speak in this debate because I, like others who are middle aged or entering into old age, use the health service more and more. My use of the health service has been rather public, I fear, and most people have read about it in the gutter newspapers. I use the national health service although I have BUPA. The hon. Member for Strathkelvin and Bearsden knows more about the gynaecological side than the male side—

Mr. Deputy Speaker: Order. The hon. Gentleman must relate his comments to the specific Bill before us or to the reasoned amendment.

Mr. Ashby: I hope that I have related my comments so far to the Bill.
I am proud of the NHS, because it is very good. I am proud about the direction in which the NHS has gone. I have always felt that private sector initiatives can be used by the NHS for the benefit of patients. That is the direction in which we should go, at our best and at our wisest. There is no demon in privatisation, although the Opposition would like to say that there is. What is good enough for the private sector is always good enough for the public sector and there is much to be gained from the private sector which would benefit the public sector.
The Labour party is anxious to build a wall between the public and private sectors. It pretends that they do not exist and fights any intrusion by the private sector, however good, into any of our institutions. The Labour party frightens the public about the national health service itself, but it also tries to frighten the public about private participation in the national health service.
The Bill is meant to give a morale boost to the private sector, yet it is opposed. We will not obtain private sector participation unless support is given to it. The private sector has to know that if it participates, it will not face bills that it should never have to face. The Bill would give the private sector a confidence that it should have.
It is a myth that the private finance initiative leads to delays. My right hon. Friend the Secretary of State for Health is a hard-working constituency Member in Leicestershire. I have known him for a long time and part of my constituency was in his constituency before the boundary changes in 1983. When I was selected, I consulted my right hon. Friend to find out what was happening and I asked him especially about the local national health service. We have done especially well. We have the new Glenfield hospital and various other hospitals in the centre of Leicester, but there were enormous delays in planning and financing those hospitals. It was a long time before we got the Glenfield hospital, even though I know that my right hon. Friend the Secretary of State worked hard to try to push the new hospital through.
The situation would be very different today. The problems started in 1979 because so many hospitals were closed by the Labour party and there were long delays in building new hospitals. As soon as the Conservative Government came to power, many new hospitals were


built and new initiatives took place. If the PFI had been in place, those schemes could have come on much more quickly and we would have had more hospitals which would have been more successful.
A private sector of a sort has been involved in hospital building for some time. I have a marvellous community hospital in Coalville. Before the war, the local people started to collect for their community hospital. After the war, they collected harder, and then the project died away a little. Then there was a tremendous burst of energy and a great collection took place for the community hospital in Coalville. The people were able to participate, by their charitable efforts, in the building of the hospital. Such participation by the private sector in financing a community hospital gives the people involved a sense of belonging. After all, the private sector possesses a great deal of expertise and can do a great deal to help the public sector with its building programmes.
Another charge levelled at the Government is that no new money is forthcoming. The Government also stand charged—without a shred of evidence—of having cut funding for the NHS. We all know that that is not true. Changes in the health service and in the sort of provision of which it is capable have led to greater expenditure. We should always remember that all capital expenditure has a revenue implication, however.
We must make use of the best in the private sector. This Bill fulfils all that I hope for. I look forward to the legislation supporting the private sector in this initiative, and to even greater future initiatives that will allow the health service to expand, to give of its best and to continue to be efficient. The NHS is the jewel in our crown, and I am extremely proud of it. [Interruption.] I cannot hear a word of what the hon. Member for Strathkelvin and Bearsden is saying, so I shall take no notice of it.
The Conservative period in government has resulted in a vastly improved national health service. The Bill does everything possible to further that improvement.

Mr. Eric Martlew: I am glad to see the hon. Member for North-West Leicestershire (Mr. Ashby) in his place. It must have taken some courage for him to come to make a speech today, although I suspect it was not his best ever. When Conservatives read it in years to come, they may realise that they were wrong about the PFI. I am compelled to speak this evening because of the constituency problems created for my electors by the PFI and by measures such as this Bill.
There is no doubt that the Bill is about removing the risk from private companies, thereby allowing them to own our hospitals with no fear of being out of pocket. The original Treasury rules required schemes funded under the PFI to involve a genuine transfer of risk to the private sector so as to justify the rate of return that might be generated. The Bill gets rid of that risk, leaving just a higher rate of return.
The Bill has become necessary because the private finance initiative has fallen at the first hurdle. The banks have decided that they are not prepared to take the risk, while the Minister has decided that he cannot afford the political embarrassment of letting the PFI fall by the wayside.
The failure of the PFI is graphically illustrated in Carlisle. It is just one in a long list of broken Government promises about the development of our district general hospital, Cumberland infirmary. The redevelopment of that infirmary began in 1968 under a Labour Government, and the first phase was completed in 1974 under another Labour Government. Next, there were various false starts, but approval was finally given for phase 2 in 1988, under the old capital allocation rules. The scheme was worked up and a start date was sought, but in September 1992 the Carlisle hospitals, under pressure from the Government, decided to become a trust. When they looked at the figures, however, they decided that the trust would not be viable if it went ahead with the building scheme—so Government dogma got in the way and the scheme was abandoned.
The decision to abort the scheme was taken in the very week the tender was due to go out, so there was great anger in my constituency. The new trust promised to set about developing another scheme, and came up with one which, the trust claimed, would provide fewer beds but would achieve the same objective and bring in savings of nearly £2 million a year if the buildings went up on the same site. Much time and public money were expended; in fact, the chief executive has quoted a figure of £400,000 spent on fees to get the new scheme in place.
The trust's scheme was finalised in the summer of 1994. There followed another body blow: the Government stepped in and said that the scheme should be put through the PFI. The trust argued that it should go ahead under the old scheme, because that was ready. Alternatively, it should be fast-tracked. The Government, however, maintained that the PFI would not delay the scheme long—that it would take five or six months to get it through the system.
It took six months just to place the advertisement in the Official Journal of the European Communities, a necessary part of the legal preparations. So six months were lost to bureaucracy.
Next, hundreds of companies applied. They were sifted down to 16, and a great deal of work went into producing a short-list of three by 9 May 1995. This was heralded as a great victory for the PFI. On 5 September, a short press release was issued by the Carlisle Hospitals NHS trust, saying that two of the companies had pulled out. That left a short-list of one; logic dictates that there is not much competition in such circumstances. The PF initiative should have been aborted, and the public money that the Government had once promised should have been provided to build the hospital.
The Government insisted that the disciplines of the market place meant that a short-list of one was acceptable. I understand that one of the subsidiaries of the shortlisted company is being investigated by the Ministry of Defence and the police for fraud. I refer to AMEC. Fears are growing that, because AMEC is the only bidder, costs will escalate and the millions of pounds that were to be saved by putting the facilities on one site will not materialise. There could even be extra costs. I want to know from the Minister whether, if extra costs are involved, the Government will meet them—or will they have to come out of patient care? That would be wholly unacceptable.
I understand that, although there has been no official announcement, AMEC wants to run the portering, the catering, security, car parking and laundry services. It is


also keenly interested—I bet it is—in running the medical records department. But the consultants in the hospital are opposed to that. There is a great deal of disquiet about the PFI among them, and they find themselves in a dilemma. They need the new hospital. They need the new facilities, but they do not want private sector involvement. One consultant said that it does not matter how good the surgeons are; if the laundry does not work and there are no sheets, one cannot do any operations. Another surgeon said:
You can't expect a private company who has so much at stake in the hospital not to try to put profit before patient care".
Consultants are in that dilemma. To some extent, many of us who have been promised new hospitals are in a dilemma: we do not want PFI, but we do not want our hospital projects delayed.
During a recent takeover bid for AMEC by Kvaerner, a Norwegian company, I met, on 11 December last year, the managing directors of both companies. I was able to get a commitment from AMEC that if it did get the scheme and took over some of the services, it would recognise a trade union. I had great difficulty explaining PFI to the Norwegian managing director of Kvaerner. He said, "We have done some privatisation in Norway, but we haven't stooped to selling off the hospitals yet." As it happened, AMEC beat off Kvaerner, which, I understand, is trying to take over Trafalgar House, but that is a different story.
The plans under consideration are creating great concern, because one of the options is to reduce the number of beds in Carlisle to less than what many of us think is necessary to provide adequate cover, especially in times of emergency, of epidemics. In the winter, there are many cases of flu and of people going into hospital. This year, there are 556 beds in Carlisle at our three sites, but the demand was such that we had to open up another ward. I understand that the bed numbers for the single-site hospital—there will be no more beds—will be 100 fewer than that total. Although I appreciate the growth of day surgery—I recently benefited from day surgery, and I suspect that, with a hernia, I would not have been able to stand for as long—we are greatly afraid. We are worried that we will get the worst of both worlds—that we will get the finance for the new hospital but that it will be decided that we cannot close the old city general, which will mean that there will be two sites, and that one hospital will be the workshop. That would be most unsatisfactory and most uneconomic from all points of view.
One forgets that when we are talking about delays in hospital provision we are talking about patient care, and, sometimes, unnecessary deaths; unfortunately, that is what happens in Carlisle. I do not believe in shroud waving, as it has no effect in this place, but the reality is that we have a problem in Carlisle with our maternity service, which is on the other side of the city from where the paediatricians are based. A report investigated the high number of perinatal mortalities in east Cumbria. On a regional basis, between 1988 and 1992, we should have had 55 deaths; we had 75.
In the northern region, my area is not one of particular deprivation, so the number of deaths should have been below the regional average, but that did not happen. One of the reasons given for that is that the paediatricians could not get across the city in time to treat sick babies.

It was estimated, not by me but by the director in charge of community services in east Cumbria, that every year there are one or two unnecessary deaths of babies in Carlisle because of that. It has not been mentioned often enough today, but the delay in the provision of facilities costs lives, and PFI in my constituency has delayed our scheme by at least two years.
I have been involved in the health service in Cumbria for many years. For a short time, until we had a Conservative Government in 1979, I was chairman of the health authority. We have been fighting for better provision. I have said all along that I will not believe that we will get a new hospital until I see them lay the first bricks. In my case and, I suspect, in many others in the rest of the country, PFI will delay. It will be a sham. It will raise people's expectations, and at the end of the day the money will not be there. The bankers will not be able to finance it and the Government will not be able to afford the long-term costs. That is why I shall be voting for the reasoned amendment.

Mr. Bob Dunn: I listened with great interest to the hon. Member for Carlisle (Mr. Martlew), who speaks with real experience, having been chairman of his local health authority in previous years. I understand the frustrations that he voiced about the future of the hospital in his constituency. At times, I have done the same in the House for my constituency of Dartford. Indeed, my hon. Friend the Member for Gravesham (Mr. Arnold) made a speech earlier—I was not able to hear it—and gave an account of the progress that we intend to make, and will make, in the provision of a new district general hospital in Dartford in the early part of next year.
Unlike the hon. Member for Carlisle, I prefer to look down the telescope the other way round. Whereas he looks from the big end down to the small, I look from the small end down to the big. A pessimist says that the bottle is half empty. An optimist says that the bottle is half full. Although we might have cause to unite, in the context of the Bill, on some manifestations of health service provision in the past few years, we must differ, in that the hon. Gentleman came to bury his health trust, whereas I come here to praise mine.
In the context of PFI, my hon. Friend the Minister will remember an Adjournment debate of 11 January this year, which I inspired, applied for and successfully obtained, on hospital provision in north-west Kent. My hon. Friend was able to tell the House on that occasion that my local health trust treated about 164,000 patients in 1994–95 and that it is expected that it will treat a further 10 per cent. in the present year. In addition, it achieved an impressive 5-star ranking in 1994–95 in the context of NHS performance tables.
As to where we see the PFI going, I can give an account of the delays, tribulations and frustrations in Dartford and Gravesham over the years, but I see the PFI as a real way forward—not a delaying or blocking mechanism or an impediment to provision but, rather, opening up and clearing the way. The window of opportunity, which we hear so often as a cliché, is real in the sense that my constituents can now look forward—if the process continues at the speed, and with the rigour and robustness we have seen hitherto—to the new district hospital being started in the early part of 1997.
The hon. Member for Carlisle gave an historical and chronological account of events in Carlisle. I shall do the same for Dartford, but not at great length. In June 1995, my local trust was granted approval to test the scheme, to provide a new general hospital under the PFI process. It advertised the scheme quite quickly in the Official Journal of the European Communities. On 5 September, following a pre-qualification exercise, four consortia, representing some big household names, were selected, and, of course, the process goes on. An important element in the short Adjournment debate on 11 January was that my hon. Friend the Minister was able to say:
The overall process is as short and efficient as it can be, consistent with ensuring that value for money and the requirements of public accountability are achieved. If all goes to plan, building work should begin during the first half of 1997—that is the present supposition.
My hon. Friend the Minister went on:
I can assure my hon. Friend the Member for Dartford that the project has the full support of all concerned—at authority level, regional level, NHS executive level and Government level. I can assure him also that the evaluation will be carried out as speedily as possible in Whitehall, so there will be no delays at our end."—[Official Report, 11 January 1996; Vol. 269, c. 388–89.]
This important legislation rounds off the process for those from the private sector who wish to enter into partnership with the health trust in the construction of hospital facilities and the provision of care services so essential in modern society. It will show them that there is a guarantee, support, an attitude of mind within Government, so that when and if existing health boards and trusts are wound up, there will be a commitment to fund the liabilities from the NHS side. This is important in the concept of partnership.
We have heard something tonight, and we will need to hear a little more, about where the Opposition stand in their support for the PFI. The hon. Member for Peckham (Ms Harman) tried but failed. She told the House that the Labour party supported the PFI but then proceeded to give reasons why she did not.
We have on public record the statement made by the Leader of the official Opposition on 4 October 1994 in a speech to his party conference. He said:
We would get public and private finance working together in transport, in housing, in capital projects, in health and education.
A little later, the right hon. Member for Derby, South (Mrs. Beckett), a former deputy leader of the Labour party, disagreed and said:
Market testing represents creeping privatisation. As does the Private Finance Initiative.
The present deputy leader of the Labour party, the right hon. Member for Kingston upon Hull, East (Mr. Prescott), speaking at a London conference on 31 May 1995, said:
I have long been associated with arguing for public-private partnerships".
That is true. As shadow transport spokesman, he made that point during many debates. At that speech in London, he went on to say:
I made the case for private sector involvement in public investment.
Exactly so. The Opposition must decide what they stand for and give tonight an outright declaration of their support for the PFI as we have determined it in the context of the NHS.
The great benefit to the NHS of the PFI is that such private capital is additional to that which can be obtained from public funding sources. That is the most important point to be made in the debate. In the context of the PFI, we are talking about additional funds, not limiting but enhancing and improving public funding of the NHS.
I welcome the Bill. It is short compared with many that I have seen in my time. It is necessary. It gives undertakings, commitment and loyalty. I hope that Opposition Members will seriously think about how they vote tonight, and not make it a left-right, Opposition-Government matter, but join Conservative Members in the Lobby tonight. I give up on the hon. Member for Peckham, because she is wholly without commitment in everything that she says and does, but there are other Opposition Members who are much clearer in their philosophy and I invite them to join us in the Lobby this evening.

Mr. Stephen Timms: I begin by apologising to you, Mr. Deputy Speaker, and to the House for not being present at the beginning of the debate, but I was serving on Committees elsewhere in the House.
I support the Opposition amendment which sets out in crystal clear terms the problems with the Bill. The problem with the private finance initiative in the major hospital projects on which Conservative Members have concentrated today is that it does not really bring in any significant new money to those projects, but rather postpones payment of the bills.
In the case of a new toll bridge, for example, where a new source of revenue is created in the form of tolls, the PFI releases new capital from the private sector, which is additional and which can be used for constructing the bridge. But in the end, a hospital is all paid for out of taxation, and the rate of interest on the capital involved, because it comes from the private sector, is greater than it would be for a publicly financed project. Therefore, it is right for my hon. Friends to raise their concerns in the amendment about the use of the PFI in the health service.
That apart, if the only effect of the Bill was to reassure providers of private finance contributing to PFI projects there would be much less objection to it. In reality, however, it is a much wider Bill which appears to give a blank cheque to NHS trusts. It gives them unlimited security for borrowing, which they have never had before. NHS trusts have not been able to take out mortgages in the past, so they have done little borrowing. Under the Bill, the whole of the public sector would stand behind their borrowing but there is no mechanism in it to control the exercise of the immense new powers that it conveys upon them. That is the problem to which the amendment draws attention. As the amendment says, the Bill
gives an open-ended commitment on the part of the taxpayer to honour the liabilities of NHS Trusts irrespective of the manner in which they have accrued".
I have not yet heard any Conservative Member address that point.
NHS trusts cannot be dissolved through insolvency, only by order of the Secretary of State, and the Bill sets out what will then happen. In the few minutes that I have, I want to suggest some of the circumstances in which a trust might run into financial problems of a kind which could lead to the powers in the Bill being invoked, other


than the circumstances for which we have been told that the Bill is intended—where a trust is dissolved for a non-financial reason and PFI liabilities are outstanding. But there are many other circumstances in which the powers in the Bill might be invoked. I shall illustrate that by describing the immense financial pressures being faced by health providers in my area of east London as the new financial year approaches. I want to concentrate on the possibility of trusts accruing liabilities in a manner other than through the PFI, as the reasoned amendment points out.
The work load borne by the health service in Newham is immense because the demand is immense. The Government's own figures show that Newham has the highest level of urban deprivation in the country with Tower Hamlets and Hackney, the other two areas covered by the East London and the City health authority, only just behind. I take no pleasure in saying it, but it is a fact that in east London there is an immense concentration of urban deprivation which is reflected in the area's health statistics. Whichever statistics one chooses, they all tell the same story: the health service in east London faces an immense task.
In 1988–92, the standardised mortality ratio in Newham was 109 compared with 100 in Britain. In 1992, it was 113. From 1988–92, the number of stillbirths and deaths in the first week of life per 1,000 total births was 9.8 in Newham compared with 8.2 in England and Wales. The percentage of total residents aged 16 and over who were prevented from working by permanent sickness was 3.9 per cent. in England and Wales but 4.9 per cent. in Newham. The percentage of limiting, long-standing illness among children aged up to four years was 2.7 per cent. in Newham compared with just 1.9 per cent. in England and Wales. Births per 1,000 women aged 15 to 44—this statistic is good news, but it creates considerable work for the health service—were 87.3 in Newham compared with 63.6 in England and Wales.
Alongside that picture of the health service's considerable work load, the resources available to the service in east London are plainly inadequate. According to the Government's 1993 figures, about three quarters of general practitioner premises in Newham are in poor condition. Since then, nothing has substantially—

Mr. Deputy Speaker: Order. This debate is about NHS trusts. It is certainly not about GPs' premises. It is not in order to relate detailed statistics on Newham, important though they are. They need to be related to the Bill or to the reasoned amendment.

Mr. Timms: I am grateful to you, Mr. Deputy Speaker. The possibility of a private finance initiative to raise the standard of GP premises has been considered by one of the trusts in the region, but I take your point. The community health service trust has considered that possibility, but I will endeavour to relate my remarks more closely to the Bill.
As the reasoned amendment sets out, trusts may accrue liabilities in other ways and not simply through the PFI. That is the anxiety to which I want to draw attention. I talked about GPs' premises. The number of dentists and health visitors employed by the community health service trust is small relative to the population.
That is the position today. What worries me is the stress and the despair that I see among some of the people working in those conditions for the health service trusts.

This is where I come to the circumstances in which the Bill will apply. The East London and the City health authority faces a large deficit next year just to keep the existing service level going. Estimates of that deficit vary between £7 million and £20 million for the coming financial year. Whatever the figure is, it is certainly a large sum and no one to whom I have spoken in the trusts has the faintest idea how that gap can be bridged. The mood is dark in the trusts that will be on the receiving of the cuts required to bridge that deficit. I would not rule out the possibility of a trust not being able to meet its financial liabilities and running into the situation in which the Bill will apply.
The position is much worse even than that. This is where people start to become angry. The new capitation formula for district health authorities will remove another large sum—in excess of £11 million—from the East London and the City health authority budget. That will be done under the new formula based on work conducted by York university, but significantly changed from what it recommended. It has not yet been implemented, but I understand that it has been confirmed as a direction in which the Government intend to move.
York university was charged with providing a resource allocations formula that reflected need. It did so, but the Department of Health changed it for reasons that have still not been explained, so that the formula no longer reflects need. In the document entitled "The Resource Allocation Consequences of the New NHS Needs Formula", published in May 1995, York university states:
In implementing the work, the Department of Health had to make a judgment about which needs index to use for distributing funds not relating to inpatient use. In the event, they have chosen to allocate 64 per cent. of the total budget according to the acute index, 12 per cent. according to the psychiatric index, and 24 per cent. according to no needs index. The report notes that the use of no needs weighting for such a large block of services, which includes community and mental handicap services, can be challenged. It illustrates the importance of the issue by comparing the Department's preferred formula with an alternative, in which the 24 per cent. is allocated using the York acute index. It is found that this option would redirect amounts of up to 5 per cent. away from the home counties towards the inner cities.
I am extremely concerned about the fact that that element is not there. Its absence cause serious financial problems for the trusts in east London.
I have corresponded with the Minister about that subject, but, given the problems that are being created, I am still at a loss to understand why the Government are pursuing the use of that formula. I have repeatedly attempted to find out why a formula is being introduced that so dramatically shifts resources away from the trusts, where they are most needed, but I still have not obtained anything like a satisfactory explanation.
The resource allocation formula is wrong. It has the opposite effect to that advertised as the Government's intention. The only explanation for its adoption that I have found is one of partisan advantage, which is disgraceful. The formula needs to be changed radically in line with York university's original proposals, so that it has the effect that the Government claimed to want.
Given the way in which things are going now, it is entirely possible that a trust, or trusts, will find it extremely difficult to meet financial obligations in east London, Manchester, Sunderland and other areas that are particularly badly affected by the formula, and the powers


in the Bill will then need to be invoked. If there is no change in the direction in which health service funding is going, we shall very soon find ourselves in the position described in the Bill. That will be to the immense disadvantage not just of people in east London and the other areas most affected, but of the Government.

Mr. John Gunnell: I can hardly be accused of hostility to the idea of public-private partnership. Let me declare an interest that, for the other purposes of the debate, need not be mentioned: I am chairman of Yorkshire Fund Managers, a joint venture company owned by Yorkshire Enterprise in the public sector and York Trust in the private sector. I have chaired the company for the past six years. The money from the public sector that goes into investments through Yorkshire Fund Managers is far more than matched by money from the private sector. My point is that I am very used to dealing with public-private partnership. As a Leeds Member, let me add that the Leeds initiative has gained a good reputation through its work with the private sector. Partnerships of this kind often make it possible for many things to be done that could not be done in the public sector alone.
The Secretary of State said that people had asked about the fact that those holding his office could still decide at the last minute whether to meet health bodies' liabilities. Why has that question just come to the fore? Why was it not asked of the last Secretary of State, or of the right hon. and learned Member for Rushcliffe (Mr. Clarke)? I think that it has arisen now for two reasons. First, there has been a considerable increase in the number of potential PFIs in the health service. That has always been a possibility, but, as the Secretary of State made clear at Question Time today, he has been signing go-ahead agreements more and more frequently. As the right hon. Gentleman accepted, however, those agreements did not have the signature that would enable the contracts to be let and things to move ahead. Before that could happen, an assurance had to be given to the providers of the money. Haste was therefore necessary. Nevertheless, I do not think that those signatures can be forthcoming until there is a clear understanding of the safeguards that exist on either side.
Secondly, there is the concentration on health finances. Many health service trusts are in the sort of difficulty referred to by my hon. Friend the Member for Newham, North-East (Mr. Timms): they do not know how their ends will be met, and they find that they do not receive a very sympathetic hearing from the Secretary of State.
It would be apposite to illustrate that point from what is happening to health in Leeds. One of the three agreements that have been given the go-ahead by the Secretary of State since the Budget involves St. James's hospital in Leeds. The St. James's and Seacroft University Hospitals NHS Trust is currently in deficit. The Government's attitude to that deficit is not especially sympathetic. My questions arise naturally from that. The Minister may say that there is much difference between capital and revenue but the same considerations arise when the Government's decisions on finance seem to increase, rather than decrease, deficits.
With all the other Leeds Members, I was invited to meet Leeds community health council to discuss that issue last Friday. The hon. Member for Leeds, North-West (Dr. Hampson) attended, with three Labour Members. According to the CHC, the St. James's trust faces a £6 million deficit this year. Not only that, but United Leeds Teaching Hospitals NHS Trust, which covers Leeds general infirmary, faces a £6 million deficit this year. The health authority has a £2 million deficit. Leeds is £14 million in deficit, according to the CHC.
Naturally, after such a meeting, one tries to check the figures. I found that the health authority was talking about a large deficit. It expected a deficit at Jimmy's of more than £1 million and a larger figure of £7 million at the Leeds general infirmary. The total figure was not so different from that of the CHC. It went further in talking about the deficits expected next year. Knowing the sums allocated by the Government for health in Leeds for the next year, it expected a deficit of nearly £5 million for St. James's and about £10 million for the LGI. Those are serious deficits.
Everything comes back to the way in which the Government have allocated health resources. Their use of the formula, as was demonstrated by the York economists, has acted against cities. That decision has resulted in a massive transfer of funds from cities where there is real and pressing need to areas where the need is not so demonstrably large, though I believe that health service funds are needed everywhere.
The hospital trusts and the health service in Leeds are penalised by the way in which the Government have allocated funds. In response to that, the Conservative party and Ministers have not recognised that, for Leeds as a whole, an estimated £18 million shortfall has been caused by that decision. Instead, they say that Leeds is overspending by £3.1 million. There is a difference of some £21 million between the Government's thinking and that of people who work in the health service in Leeds about the funding that the city needs. Under those circumstances, it is not surprising that people would wish us to hesitate before underwriting the money that is to be allocated for such projects.
I am told that it is hoped that the St. James's project contract will be signed in April. In those circumstances, it would be the first scheme to go ahead. I recognise that some of the facilities will benefit some of my constituents, so I hope that the scheme goes ahead. I accept that it will benefit the public of Leeds as a whole, so I wish it well. One improvement that will help my constituents is that 166 of the 246 extra beds will be available in the public sector.
Let us consider some of the conditions that my hon. Friend the Member for Peckham (Ms Harman) says should apply to public-private partnerships. First, the health service must be run by the NHS; secondly, private finance must be in partnership with public finance; thirdly, the public sector must set the priorities in the public interest.
The St. James's scheme meets some of those conditions, but a number of important questions remain. What happened to the original scheme for the development at St. James's? I was a member of the Leeds health authority before coming to the House; I was also a member of the local council. The health authority asked me to approach the local authority because the city


council owned a great deal of land around the St. James's site. I played a minor part in the negotiations that eventually led to the transfer of 13.5 acres of land to the hospital trust.
The PFI uses that very land. The press release that accompanied the announcement about the transfer made it clear that the local authority played a key role throughout. It was right that the local authority should make that land available. However, I remember that when I was first asked to approach the city council the primary uses for the land were intended to be for a car park and a nurses' home. The car park project still exists, but can the Minister tell me what happened to the nurses' home?
I want the Minister to give me an assurance about the development. When the general public go to St. James's, the worst aspect for them is that it is almost impossible to park. It is sometimes an advantage to be a Member of Parliament as it enables me to park at St. James's hospital. That gives me an advantage when I want to nip in and see my constituents. The public complain bitterly about the car parking problem.
I want to be sure that if the private sector is involved in providing the car park, the parking charges will not be such that my constituents will not be able to afford to park when they visit their relatives. I am, of course, referring to those of my constituents who can manage to get to the hospital by private transport; large numbers of them cannot do so. We do not expect the parking to be free, but the charge should not be greater than they would pay in a small city council car park outside the hospital.

Mr. Deputy Speaker: Order. I am having enormous difficulty relating car parking charges to the Bill, but perhaps it will all become clear in a moment.

Mr. Gunnell: It is clear, Mr. Deputy Speaker, because the scheme will, rightly, go ahead—yet there are still questions to ask about the financing of it.
I shall rapidly move away from that subject and raise one or two other issues. I would like to be sure that safeguards are in place. I believe that the hon. Member for Worcester (Mr. Luff) got it wrong. He said that this is a Bill in which the risk is borne by the private sector, not by the public sector. It is obvious from what the Secretary of State for Health said that the public sector carries the risk. What will happen if something goes wrong with the private sector partners who are involved in this project? If the private sector partners go bust, will the Secretary of State bail them out as well?
If there is a hospital and part of it is private and part of it is public, what conditions will apply to the staff? Morale is already at a low ebb among staff in the health service, and I would not like to think that there would be two sets of staff with different sets of conditions of service—so that some are seen to have a more privileged position.
I am disappointed that some facilities will not be available to most of my constituents. If the private sector is involved in the scheme, it will want to get something out of it. We have to be careful to keep that well under control, to ensure that any scheme that goes ahead has a strong net benefit to the public sector and to ensure that it is genuinely carried out at a lower cost than the public sector would be paying if it were getting that same benefit by going it alone.

Mr. Kevin Barron: Today's debate has exposed the shambles that the Government have made of their attempts to privatise parts of the national health service. Successive Secretaries of State have promised us newer, bigger and better hospitals; they have promised us faster and more efficient services; and they have assured us that the Conservatives have a gleaming vision for an invigorated, market-managed, private sector-controlled national health service. However, the words of the Tories—and of the Secretary of State today—have been shown for what they are: hollow, empty promises. An endless stream of broken promises has brought the Secretary of State to the House today with this Bill.
My hon. Friend the Member for Peckham (Ms Harman) detailed those broken promises: Norwich, Carlisle, Swindon, Durham and others have been waiting years for new hospital buildings. They have been promised by the Government but have been continually delayed. The Secretary of State for Health spoke at the Royal College of Physicians on Tuesday 21 November 1995, and I shall quote from part of his speech:
Every part of the country has its own story of a new facility that has been promised and planned and then delayed, mangled and often cancelled. Too many NHS hospitals bear the scars of this haphazard process".
Perhaps the Secretary of State would like to reflect on his words at that conference—they describe exactly the shambles that he has created with the private finance initiative in the health service. When he used those words, he claimed that he was painting a picture of public sector capital planning, but he must see that they apply fully to the situation that he has brought before the House today.
The Secretary of State for Health and the hon. Member for Aylesbury (Mr. Lidington) quoted what I said at a conference of the Association of the British Pharmaceutical Industry earlier this year. I shall give hon. Members the benefit of the doubt because it is quite clear that the Central Office brief used only a small part of my speech in relation to what I said about PFI. I should like to put what I said at the conference in context. I said:
We do not disagree with PFI—how could we? It was Labour who first thought of partnerships between the public and private sector. We argued that it would enhance investment because of the long-term inability of governments to maintain capital investment".
I then said—this is the section that was missed out in the Smith square brief:
But what the Conservatives are attempting is to replace capital investment with PFI. The Budget produced a 17 per cent. cut in the NHS capital programme. The Secretary of State believes that private finance will fill this gap. But, to do so, there needs to be—in one year—a massive 242 per cent. increase in private money poured into the NHS. Given the history of PFI in the Health Service, can we really expect that to happen?
The answer to that question is no, we cannot expect that to happen. That is what is behind it. The Government have forgotten that the private sector is not as unconnected from reality as they are. The private sector has realised what the Department has failed to acknowledge since the very first day that it set the internal market in train: that the so-called NHS reforms, and specifically the internal market, are incoherent, ill thought out, ineffectively planned and incompetently implemented.
Today, the Secretary of State has placed before the House a Bill to revise those reforms, rewrite the past and reinterpret his role. That has been the most striking feature


of the Secretary of State's tenure at the Department. He has attempted to retell the story of the Conservative Government's fragmentation of our national health service, with himself as its saviour, although he fails to mention that he is trying to save the NHS from the Tory Government of whom he is a member.
The Bill is not about trying to make this discredited Government look good on health by claiming to care; it is about patching up another hole in the NHS framework that the Government have created. Because there is no guarantee within the national health service framework that it will be paid, the private sector will not bail out the Government in their failed PFI policy so, in a classic piece of double-think, the Government are bailing themselves out by guaranteeing the payments that it needs to survive. It is like someone jumping out of a crashing aeroplane to keep the plane aloft and save themselves from death.
At least the hon. Member for Worcester (Mr. Luff) had the courage to say what the Bill was about; the Secretary of State avoided doing so.
My hon. Friend the Member for Peckham rightly said that the Bill had not been thought out. The fundamental purpose is not, as the Secretary of State claimed, a minor revision of already followed practices. It is not a Bill to clear up an anomaly in law. Patching up another hole in the NHS framework means undermining many principles that the Government claim to be sacred. The Bill would fundamentally alter the basis on which the Department and the public purse take on liabilities. It would expose the public sector to as much as £5 billion of liabilities, which the Secretary of State would have no way of controlling.
The House has been asked to pass a Bill giving the private sector the right to charge the national health service as much as £5 billion for its services, safe in the knowledge that it could bankrupt NHS trusts and still get its money back.

Mr. Horam: indicated dissent.

Mr. Barron: I am willing to give way on that point, because the Secretary of State said earlier that trusts can borrow without his consent. It is my contention that that is at the back of this.
The Secretary of State is asking the House to underwrite £5 billion of private sector contracts without any Minister having a say in what the contracts are for or what they contain. The Bill spends public money without public accountability. No Minister would have a right to control the mounting liabilities that the Bill might create. Ministers get no say in writing the contracts; they write the cheques only if those contracts go wrong.
That is not what the private finance initiative in the national health service was designed for. That is not what Ministers told the House and the country that the PFI would do. When the national health service executive wrote last year to pass on the ministerial diktats on PFI, it did not say to the trusts, "Spend as much money as you like; enter any crazy contract you wish; the Government do not need to know. We shall just bail you out if you make that decision." Instead, on 20 March 1995, the NHS executive said:
A fundamental principle of the PFI is transfer of risk to the private sector.

This Bill does exactly the opposite. It makes contracting in the NHS under the PFI totally gilt-edged and absolutely risk free.
The NHS guideline notes on the PFI were specific. They detailed, in a headline style, 20 ways in which to transfer risks. The notes said:
In many cases, the private sector should be able cost-effectively to assume the entire responsibility for the first ten risks, while taking a substantial share of the rest.
Some of the risks identified were:
construction cost overruns; losses caused by late completion; costs of correcting defects; maintenance and repair costs; failed income generation schemes; failure to meet targets; losses through inefficiency and competition; higher than expected running costs; losses from unexpectedly low resale values.
The list goes on. If this Bill is passed, that list of possible risks will be transferred not to the private sector but to the Secretary of State.
How does the Minister who will make the winding up speech hope to reconcile the Bill's purpose with the Secretary of State's comments to the Royal College of Physicians in November last year, when he said:
We seek a risk-bearing partnership with the private sector which allows a proper return to the successful partner, but expects the unsuccessful partner to carry his proper share of responsibility.
Where is the responsibility if we say that the British taxpayer, without taking a part in the decision, can write off any liabilities that are entered into? There is none.
My hon. Friend the Member for Carlisle (Mr. Martlew) said that there is no risk, and he is absolutely right. In Carlisle, a hospital that was promised years ago has been slowed down by the PFI, and any risk that was to be taken by the private sector will now be written off. I must commend his speech. I also looked at the soccer results before I came back into the Chamber, and Rotherham United have beaten Carlisle 2–0 tonight. We will be going to Wembley on 14 April. Their team made it last year, so we are sharing in the success.
This Bill ends risk-bearing by private contractors. Their bills are guaranteed to be paid, no matter how badly they have designed, built, financed or operated the contracted duties. Trusts could be falling over people offering to contract with them. Conceivably, a contract could be presented to build a new facility for free, a few cost overruns could be dropped in and then the contract could be laid on the Secretary of State, who would pick up the tab.

Mr. Dorrell: That is not true.

Mr. Barron: That is true; the right hon. Gentleman did not explain any of that when he opened the debate. This Bill is nothing more than a charter for cowboys, who could use it to milk the British taxpayer through the NHS.
The Bill is a cynical measure. It has been designed so that, in the run-up to the general election, the Secretary of State and, perhaps, the Prime Minister can be seen walking around building sites, promising new hospitals for all. In this debate we have heard about the six years that people in Norwich have had to wait, and they still do not know if there is an agreement. Ministers know full well, as does the House, that they will be exposing us—

Mr. Patrick Thompson: Will the hon. Gentleman give way?

Mr. Barron: The hon. Gentleman has just dropped down out of the Gallery.
Ministers will be exposing us to a possible £5 billion worth of debt, over which the Secretary of State will have no control at all.

Mr. Thompson: I am conscious of the fact that I have not been present through all the debate, but references to Norwich should be accurate. The long delays in the Norwich hospital have been due to changes of mind on the siting of the hospital and have nothing to do with the PFI. I hope that the hon. Gentleman will persuade members of the Labour party to stop campaigning for alternative sites, because that will cause further delay. He should concentrate on matters that he knows something about.

Mr. Barron: I am pleased that I gave way to the hon. Gentleman, because he is using the same logic as that used by the hon. Member for Worcester (Mr. Luff), who argued that the Worcester hospital has been delayed for the past two years because of our amendment.
The hon. Member for Norwich, North (Mr. Thompson) should have been here earlier to hear my hon. Friend the Member for Peckham read out a press release that was produced by the Department of Health in 1990. The then Secretary of State read out the press release and spoke of the great things that were to happen involving the new hospital in Norwich. It is a pity that the hon. Gentleman was not here to hear that.
Many people are concerned that the PFI is nothing more than a ramp for privatisation, and those concerns are heightened by the overarching secrecy that surrounds the PFI. The Secretary of State smiles, but many clinicians inside the NHS fear that the decisions that they take now will not be taken if other people, who put the concrete in the hospitals, also run and manage the services. The Secretary of State knows that that is the case because it is well documented. That is why the right hon. Gentleman says that the Government will never do anything unless clinicians say that it is all right to do so. He knows that he ignored those same clinicians when they wrote to him to say that he should not reorganise the National Blood Authority.
The Bill commits the House to supporting debt resulting from contractual obligations about which we can discover nothing. Secrecy and mystery surround every turn of the PFI process. When I recently received some information from one hospital trust about the PFI, the paper came in marked "confidential" and its recipients were sworn to secrecy about its contents. The document contained nothing more exciting than a budget for running the PFI process. That budget is commonly acknowledged to be in the region of £1 million a time.
The greatest secrecy surrounding PFI is that nobody knows where the boundaries are. At last month's health questions I asked the Secretary of State to tell the House which services were clinical services—and therefore need not go out to PFI—and which were clinical support services. He said that the clinical and clinical support services were
both well-known terms of art within the health service. The scope of those terms is well defined."—[Official Report, 13 February 1996; Vol. 271, c. 794.]
He should remember that occasion as I wrote to him two days later and asked him to define the terms. I thought that the House would appreciate a list stating which

services were clinical and which were not. In view of what he had said, I thought that my request was reasonable, but one month has passed and my postbag remains singularly empty of correspondence on that matter from the Secretary of State. Perhaps he will answer the letter and tell me exactly what he means when he talks about PFI in the health service.
Is it true that nothing is outside the scope of the PFI and literally everything is up for grabs? If so, I believe that the House will take a dim view of the privatisation of clinical services with a cast-iron guarantee of return from the Government. Clinicians are already worried that their service will be privatised and the Bill will not ease their concerns.
Contractors are worried that they will not get paid if the Secretary of State does not change more NHS regulations. The Bill is designed to make them feel better. Contractors and private sector consortiums fear that they are being asked to sign agreements with weak and insubstantial NHS trusts.
The Government's health service reforms have created organisations that the Secretary of State can dissolve almost at will; they lack accountability to their communities and to Parliament. The reforms have created trusts that operate without effective forms of control; they are able to borrow without the statutory approval of the Secretary of State. The private sector fears that the agreements entered into with the trusts will not be safe. Banks fear losses and the insecurity caused by the continual upheaval in the NHS brought about by the internal market.
There are also Government fears: Ministers fear that their reforms have created a monster that they cannot control. They fear that they have built a system that stands permanently on the point of collapse, which is exactly what they have done. The Government fear the electoral annihilation that awaits them and Ministers fear voters far more than any concerns about the massive increase in public borrowing that the Bill could bring about.
The Labour party cares about the public purse and public borrowing, which is why we shall vote for our reasoned amendment. As my hon. Friend the Member for Peckham said earlier, we cannot support the Second Reading of the Bill because it commits the taxpayer to signing a blank cheque for as much as £5 billion over which the Secretary of State has no control. It is a badly thought-out Bill that is being rushed through the House by a scared Government who are unable to cope with the chaos that they have created in the national health service.
It is inconceivable that the so-called anomaly has only now come to the Department's attention. Newchurch and Co.—the official guardians of the PFI in the health service—recognised in autumn 1994 the problems created by the Government's haphazard and incoherent trust system. It questioned the implications of the dissolution of a trust and said:
The rights of contractors in the event of default by an NHS trust is an issue of concern to many.
It is quite clear that the Government have resisted changing the law at least since 1994. One might think that the issue was not keeping the Secretary of State awake at night until two weeks ago when he telephoned my hon. Friend the Member for Peckham. The Government have known about the anomaly for a long time and their best


effort ignores their own logic. Newchurch consultants have long recognised—as they say in their "Guide to the PFI"—that
In all but the most exceptional circumstances, capital sourced from the private sector is going to be more expensive than money provided by Her Majesty's Treasury".
The Secretary of State has admitted that it is perfectly true that capital always costs more in the private sector than it does in the public sector. In his speech to the Royal College of Physicians, he said:
I am strongly in favour of testing public and private sector solutions and adopting the approach which offers best value".
We agree entirely with best value, but we remain unconvinced that worst value can be underwritten by the Bill and that the Department of Health does not have to take a decision about it.
We tabled the amendment because we are concerned about the state of the national health service. We do not believe that the PFI is any substitute for the public investment that was cut by 17 per cent. in the last Budget. If the PFI is to apply to the health service, it should be on the basis that it is additional and that it will do what it is supposed to do. Dozens of hospitals that should have been built—some of them years ago—remain on the architects' drawings boards because of the Government's belief that the private sector is always the way to go. We do not believe that that is correct in all circumstances. [Interruption.]
The Secretary of State sits there heckling with his feet up. He should start doing his job: he should come to the Dispatch Box and, instead of being flip, tell us the real consequences of the legalisation that he introduces in this place. I ask my hon. Friends to join me in the Division Lobby tonight in order to begin to sort out the mess that the Government have made.

The Parliamentary Under-Secretary of State for Health (Mr. John Horam): I am somewhat disappointed by the efforts of Opposition Front-Bench Members in the debate. I am aware that the hon. Member for Peckham (Ms Harman), following the rumpus surrounding her decision to send her son to an excellent school in my constituency—I have not had the opportunity to congratulate her on her excellent choice; Bromley is renowned for its hospitals as well as its education facilities—

Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. The Bill is about the Health Service and not schools.

Mr. Horam: I congratulate the hon. Lady, and I know that she will accept it in good heart. Following the rumpus surrounding her decision, she no doubt wanted to show her mettle and prove that she is not a liability to the Opposition Front Bench.

Mr. McLeish: It was an excellent speech.

Mr. Horam: The hon. Gentleman may have thought so, but I am not sure that that is the consensus in the House. The hon. Lady was rather unwise to take such a

strident line with regard to the Bill. It is clearly a responsible measure—any objective observer would regard it as the ultimate in responsibility. It is a Bill of probity. The Bill will save the taxpayer far more money than the largesse to which the hon. Lady referred. I know that the Opposition are rather more casual in their regard to money than we are, but the Bill will save the taxpayer a great deal of money.

Rev. Martin Smyth: I appreciate the Minister giving way. I understand the point that he is making, which relates to the national health service. Just a few weeks ago, we were informed by the Minister responsible for health in Northern Ireland that, because of its confidential nature, he could not give us advance notice of a similar measure relating to Northern Ireland. He went on to say that it would be dealt with by negative resolution. Yet there is doubt as to whether it could meet the Privy Council calendar and take effect at the same time as the Bill.
Would it be possible, even at this late stage, for the legislation to cover the national health service in Scotland and Northern Ireland, bearing it in mind that there is a wry expression on the faces of people in Dungannon, where a private finance initiative that was prepared to invest in a magnetic resonance imaging scanner was turned down?

Mr. Horam: The commencement of the Bill is a separate matter, but I have heard what the hon. Gentleman said, and no doubt my right hon. Friend the Secretary of State will ensure that the matter is dealt with sensibly and properly at the appropriate time.
I wonder whether the hon. Member for Peckham really understands the line that she has taken. Once again, she said that the PFI is about privatisation and that she is opposed to it, unlike many of her hon. Friends, including the Leader of the Opposition and the hon. Member for Rother Valley (Mr. Barron), until his rather dutiful retraction during his closing remarks. I was rather sorry that he had to explain away his words.
The Opposition are not clear where they stand. We are uniformly and unilaterally united in favour of PFI, while they cannot make up their mind. They use weasel words about private and public partnerships. At least the hon. Member for Morley and Leeds, South (Mr. Gunnell), in an excellent speech, made it perfectly clear that he understands what the Bill is about, and I hope that he will join us in the Lobby tonight.

Mr. Keith Bradley: Will the Minister give way?

Mr. Horam: No. The Opposition are unclear as to whether they are opposed to the PFI, half-heartedly in favour of it or wholly in favour of it.
Unusually, the Opposition's health spokesmen wish to put the Department of Health in a worse position than other Departments. As was pointed out in the Financial Times this morning, the Bill seeks to create a level playing field. The Health Department is currently in a worse position than other Departments in regard to raising private money, precisely because of existing legislation.

Ms Harman: Whose legislation?

Mr. Horam: The legislation goes back to 1977 and 1948, so we cannot make it a party political matter.
The Bill creates a level playing field. The hon. Lady, as Opposition health spokesman, is prepared to place the Health Department in a worse position. She has not understood that—perhaps she did not read the Financial Times this morning—but she is prepared to accept it. I understand that she does not want to build more hospitals through the use of private finance in the same way as we do, but it is extraordinary that she wishes to disadvantage health in relation to other areas of spending such as education. The hon. Lady has got herself into an extraordinary position in opposing the Bill.
Finally, the hon. Lady said that a threat hangs over the hospitals as a result of the PFI, yet she plans to vote against the Bill. If there is a threat hanging over hospitals, the Bill provides exactly the way to remove it. Again, the Opposition are in a total muddle.

Mr. Bradley: Will the Minister give way?

Mr. Horam: No. I have very little time.
The Opposition take a contradictory position. Members of Labour's Front-Bench team hold about three different positions, as between their leader and senior and junior health spokespersons. The Opposition accuse us of being in a shambles, but their position is a total mess.

Mr. Bradley: Will the Minister give way now?

Mr. Horam: No, because the hon. Gentleman did not take part in the debate.

Mr. Deputy Speaker: The Minister has made it clear that he will not give way.

Mr. Horam: I am sorry if I cannot deal with all the points made in the debate, but there were several speeches, and a number of them were in similar vein. My hon. Friend the Member for Aylesbury (Mr. Lidington) made an excellent speech.

Mr. Galbraith: No, it was not.

Mr. Horam: Perhaps the hon. Gentleman did not hear my hon. Friend, but I thought that his speech was excellent. He pointed out again that the Opposition have not committed themselves to an increase in resources. This Government committed themselves to increasing resources in real terms and fulfilled that commitment. The Opposition have yet to make any kind of commitment. The hon. Member for Peckham cannot wriggle out of her remarks about resources. It is particularly ironic, after all the fuss that Labour made after the previous general election, that the Opposition will not budge on resources. That is most telling.
My hon. Friend the Member for Aylesbury thought that there was a difference between finance leasing and an operating lease, which he wanted me to explore, and I shall do so. He conceded that much would depend on whether accountants could be made to agree. That is a rather different matter. I do not know about making lawyers or economists agree, but making accountants agree would certainly be extremely difficult.
The speech of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) had all the hallmarks of Victorian melodrama. I am fond of the hon. Gentleman—he certainly adds colour and life to the House.

The Parliamentary Under-Secretary of State for Health (Mr. John Bowis): Or to the Hackney Empire.

Mr. Horam: My hon. Friend took the words out of my mouth. The hon. Gentleman's speech would have been good for the Hackney Empire. It was a Grand Guignol speech.
The hon. Gentleman was rightly concerned about fiscal probity. As a former member of the Public Accounts Committee, so am I, and certainly I do not run second to the hon. Gentleman in that matter. He can be assured that the Bill enhances the fiscal probity of the PFI and the NHS.

Ms Harman: Will the Minister give way?

Mr. Horam: No, because I have not had a chance to get into my speech. I have 10 minutes left. No, nine minutes. Good heavens—that is ridiculous.

Ms Harman: rose—

Mr. Deputy Speaker: Order. The Minister has made it clear that he will not give way.

Mr. Horam: There is also a convention that a Minister who is winding up after a seven-hour debate comprising as many speeches as we have heard today is allowed some time to reply to points made from all parts of the House. It is absurd of the hon. Lady, having made a 40-minute speech, to expect to intervene again.
My hon. Friend the Member for Gravesham (Mr. Arnold), who could not remain for the end of the debate, and my hon. Friend the Member for Dartford (Mr. Dunn), made points about hospitals in their constituencies. They understand my position and know that we are making good progress.
The hon. Member for Southwark and Bermondsey (Mr. Hughes) made a telling and thoughtful intervention. He suggested as an alternative to the Bill an insurance premium, providing for payment in the case of default. I believe that the hon. Gentleman understands that money taken as insurance premiums from solvent trusts would reduce the money available for health care. He said that he supported the principle of the Bill, in the sense that the Government should be responsible for the way in which they conduct their business. Curiously, he went on to say that he could not support this particular Bill because he did not feel that we would test value for money in a suitable way. He is wrong. The whole point of the PFI is that it tests value for money against the public alternatives.

Mr. Simon Hughes: Will the Minister give way?

Mr. Horam: No, I am not giving way because I have only six minutes left.
Public will be tested against private, and if private finance does not win, public finance will be used. That is the exact test that the hon. Member for Southwark and


Bermondsey wanted. He made an important point about how far the Bill would fill in the hole created by the withdrawal of capital funding from the public sector. He is right to point out, and my right hon. Friend the Secretary of State agreed, that there is some withdrawal, for the year starting in April, from the capital fund for hospital provision. But there will be a huge increase of £1.3 billion in current spending, and even the hon. Gentleman must admit that all that money comes from the public sector.
We have been able to increase spending by so much—for nurses, doctors and health care—simply because we have made a much smaller reduction in capital funding. That small reduction has been partly covered by receipts from land sales, as well as by PFI investment, and there will be a huge overall increase in spending next year and a tiny decrease in public funding for the capital sector. The hon. Gentleman's point is, therefore, not really relevant.
I return to the speeches of Opposition Front Benchers. [Interruption.] Good heavens, I have only five minutes left. The hon. Member for Peckham claimed to make five points in her speech. I counted only four, so five was an exaggeration. She said that my right hon. Friend the Secretary of State had broken all the promises on hospitals. I know of no major delays in projects currently being implemented since the PFI arrangements were put in hand.

Mr. Martlew: Will the Minister give way?

Mr. Horam: No. Carlisle hospital is a good example of a hospital that has been built in stages. Stage 1 was completed in 1975, and nothing has been done since then. That is the reality of hospital building before the PFI—delay after delay, and stage 1, stage 2 and stage 3. Under the PFI, there will be no delay and we can build a hospital in one go. Nor should there be any delay, because the PFI exercise can be done in the same time and in the same way as going through a full business case. There would be no reason for any delay, and there has been no serious delay as a result of the PFI.
My hon. Friend the Member for Norwich, North (Mr. Thompson) made it clear in his intervention that Norwich hospital had suffered no delay as a result of the PFI. The hon. Member for Rother Valley mentioned North Durham hospital. The PFI has caused no delay for North Durham hospital.

Mr. John Garrett: Will the Minister give way?

Mr. Horam: No, I have only three minutes left.

Mr. Deputy Speaker: Order. I repeat that the Minister has made it clear that he is not giving way.

Mr. Horam: The hon. Member for Peckham also made the tired claim that the PFI was a Trojan horse for privatisation. She had to go as far as Stonehaven in Scotland to produce one example that looks remotely like privatisation. Even that example is not privatisation of the clinical sector, but a perfectly sensible arrangement that the clinicians support.
The hon. Lady went on to try to link privatisation with market testing. Again, the Opposition are entirely wrong. Market testing has saved the taxpayer hundreds of thousands of pounds. A billion pounds in total has been saved by the health service by contracting out services, and that is a good example of the private sector bringing its skills to bear to improve the performance of health care.
The hon. Lady's final point—her coup de grâce—amounted to a ludicrous claim that this all means a blank cheque for £5 billion—as if there were no external financing limit, no quarterly reporting, no balance between receipt and revenue. The fact is that the Opposition's reasoned amendment is a nonsensical sham. It is wholly without substance, and it should be defeated.

Question put, That the amendment be made:—

The House divided: Ayes 264, Noes 295.

Division No. 75]
[9.59 pm


AYES


Abbott, Ms Diane
Cox, Tom


Ainger, Nick
Cummings, John


Ainsworth, Robert (Cov'try NE)
Cunliffe, Lawrence


Allen, Graham
Cunningham, Jim (Covy SE)


Anderson, Donald (Swansea E)
Cunningham, Rt Hon Dr John


Armstrong, Hilary
Dafis, Cynog


Ashdown, Rt Hon Paddy
Darling, Alistair


Ashton, Joe
Davies, Bryan (Oldham C'tral)


Austin-Walker, John
Davies, Chris (L'Boro & S'worth)


Barnes, Harry
Davies, Rt Hon Denzil (Llanelli)



Barron, Kevin
Davies, Ron (Caerphilly)


Battle, John
Davis, Terry (B'ham, H'dge H'l)


Bayley, Hugh
Denham, John


Beckett, Rt Hon Margaret
Dewar, Donald


Beith, Rt Hon A J
Dixon, Don


Bell, Stuart
Dobson, Frank


Benn, Rt Hon Tony
Donohoe, Brian H


Bennett, Andrew F
Dowd, Jim


Benton, Joe
Dunwoody, Mrs Gwyneth


Bermingham, Gerald
Eastham, Ken


Berry, Roger
Etherington, Bill


Betts, Clive
Evans, John (St Helens N)


Blunkett, David
Fatchett, Derek


Boateng, Paul
Faulds, Andrew


Bradley, Keith
Field, Frank (Birkenhead)


Brown, Gordon (Dunfermline E)
Fisher, Mark


Brown, N (N'c'tle upon Tyne E)
Flynn, Paul


Bruce, Malcolm (Gordon)
Foster, Rt Hon Derek


Burden, Richard
Foster, Don (Bath)


Byers, Stephen
Foulkes, George


Caborn, Richard
Fyfe, Maria


Callaghan, Jim
Galbraith, Sam


Campbell, Mrs Anne (C'bridge)
Galloway, George


Campbell, Menzies (Fife NE)
Gapes, Mike


Campbell, Ronnie (Blyth V)
Garrett, John


Campbell-Savours, D N
George, Bruce


Canavan, Dennis
Gerrard, Neil


Cann, Jamie
Gilbert, Rt Hon Dr John


Chidgey, David
Godman, Dr Norman A


Clapham, Michael
Godsiff, Roger


Clark, Dr David (South Shields)
Golding, Mrs Llin


Clarke, Eric (Midlothian)
Gordon, Mildred


Clarke, Tom (Monklands W)
Graham, Thomas


Clwyd, Mrs Ann
Grant, Bernie (Tottenham)


Coffey, Ann
Griffiths, Nigel (Edinburgh S)


Cohen, Harry
Griffiths, Win (Bridgend)


Connarty, Michael
Gunnell, John


Cook, Frank (Stockton N)
Hain, Peter


Cook, Robin (Livingston)
Hall, Mike


Corston, Jean
Hanson, David


Cousins, Jim
Hardy, Peter






Harman, Ms Harriet

Miller, Andrew


Harvey, Nick
Mitchell, Austin (Gt Grimsby)


Hattersley, Rt Hon Roy
Moonie, Dr Lewis


Heppell, John
Morgan, Rhodri



Hill, Keith (Streatham)
Morley, Elliot


Hinchliffe, David
Morris, Rt Hon Alfred (Wy'nshawe)


Hodge, Margaret
Morris, Estelle (B'ham Yardley)


Hoey, Kate
Mudie, George


Hogg, Norman (Cumbernauld)
Mullin, Chris


Home Robertson, John
Murphy, Paul


Hood, Jimmy
Nicholson, Emma (Devon West)


Hoon, Geoffrey
Oakes, Rt Hon Gordon


Howarth, Alan (Strat'rd-on-A)
O'Brien, Mike (N W'kshire)


Howarth, George (Knowsley North)
O'Brien, William (Normanton)


Howells, Dr Kim (Pontypridd)
O'Hara, Edward


Hoyle, Doug
Olner, Bill


Hughes, Kevin (Doncaster N)
O'Neill, Martin


Hughes, Robert (Aberdeen N)
Orme, Rt Hon Stanley


Hughes, Roy (Newport E)
Parry, Robert


Hughes, Simon (Southwark)
Pearson, Ian


Hutton, John
Pickthall, Colin


Illsley, Eric
Pike, Peter L


Ingram, Adam
Pope, Greg


Jackson, Glenda (H'stead)
Powell, Ray (Ogmore)


Jackson, Helen (Shef'ld, H)
Prentice, Bridget (Lew'm E)


Jamieson, David
Prentice, Gordon (Pendle)


Janner, Greville
Primarolo, Dawn


Jones, Barry (Alyn and D'side)
Purchase, Ken


Jones, Ieuan Wyn (Ynys Môn)
Quin, Ms Joyce


Jones, Jon Owen (Cardiff C)
Randall, Stuart


Jones, Lynne (B'ham S O)
Raynsford, Nick


Jones, Martyn (Clwyd, SW)
Reid, Dr John


Jones, Nigel (Cheltenham)
Rendel, David


Jowell, Tessa
Robertson, George (Hamilton)


Kaufman, Rt Hon Gerald
Robinson, Geoffrey (Co'try NW)


Keen, Alan
Roche, Mrs Barbara


Kennedy, Charles (Ross,C&S)
Rogers, Allan


Kennedy, Jane (L'pool Br'dg'n)
Ross, Ernie (Dundee W)


Khabra, Piara S
Rowlands, Ted


Kilfoyle, Peter
Ruddock, Joan


Lestor, Joan (Eccles)
Sedgemore, Brian


Lewis, Terry
Sheerman, Barry


Liddell, Mrs Helen
Sheldon, Rt Hon Robert


Litherland, Robert
Shore, Rt Hon Peter


Livingstone, Ken
Short, Clare


Lloyd, Tony (Stretford)
Simpson, Alan


Llwyd, Elfyn
Skinner, Dennis


Loyden, Eddie
Smith, Andrew (Oxford E)


Lynne, Ms Liz
Smith, Chris (Isl'ton S & F'sbury)


McAllion, John
Smith, Llew (Blaenau Gwent)


McAvoy, Thomas
Soley, Clive


McCartney, Ian
Spearing, Nigel


McCartney, Robert
Spellar, John


Macdonald, Calum
Squire, Rachel (Dunfermline W)


McKelvey, William
Steel, Rt Hon Sir David


McLeish, Henry
Steinberg, Gerry


Maclennan, Robert
Stevenson, George


McNamara, Kevin
Stott, Roger


MacShane, Denis
Strang, Dr. Gavin


McWilliam, John
Straw, Jack


Madden, Max
Sutcliffe, Gerry



Maddock, Diana
Taylor, Mrs Ann (Dewsbury)


Mahon, Alice
Taylor, Matthew (Truro)


Mandelson, Peter
Thompson, Jack (Wansbeck)


Marek, Dr John
Timms, Stephen


Marshall, David (Shettleston)
Tipping, Paddy


Marshall, Jim (Leicester, S)
Touhig, Don


Martin, Michael J (Springburn)
Trickett, Jon


Martlew, Eric
Turner, Dennis


Maxton, John
Tyler, Paul


Meacher, Michael
Vaz, Keith


Meale, Alan
Walker, Rt Hon Sir Harold


Michael, Alun
Wardell, Gareth (Gower)


Michie, Bill (Sheffield Heeley)
Wareing, Robert N


Michie, Mrs Ray (Argyll & Bute)
Watson, Mike


Milburn, Alan
Welsh, Andrew





Wicks, Malcolm
Wray, Jimmy


Wigley, Dafydd
Wright, Dr Tony


Williams, Rt Hon Alan (Sw'n W)
Young, David (Bolton SE)


Williams, Alan W (Carmarthen)



Wilson, Brian
Tellers for the Ayes:


Winnick, David
Ms Janet Anderson and Mr. Malcolm Chisholm.


Wise, Audrey





NOES


Ainsworth, Peter (East Surrey)
Curry, David (Skipton & Ripon)


Aitken, Rt Hon Jonathan
Davis, David (Boothferry)


Alexander, Richard
Day, Stephen


Alison, Rt Hon Michael (Selby)
Deva, Nirj Joseph


Allason, Rupert (Torbay)
Devlin, Tim


Amess, David
Dicks, Terry


Arbuthnot, James
Dorrell, Rt Hon Stephen


Arnold, Jacques (Gravesham)
Douglas-Hamilton, Lord James


Arnold, Sir Thomas (Hazel Grv)
Dover, Den


Ashby, David
Duncan-Smith, Iain


Atkins, Rt Hon Robert
Dunn, Bob


Atkinson, David (Bour'mouth E)
Durant, Sir Anthony


Atkinson, Peter (Hexham)
Dykes, Hugh


Baker, Rt Hon Kenneth (Mole V)
Eggar, Rt Hon Tim


Baker, Nicholas (North Dorset)
Elletson, Harold


Baldry, Tony
Emery, Rt Hon Sir Peter


Banks, Matthew (Southport)
Evans, David (Welwyn Hatfield)


Banks, Robert (Harrogate)
Evans, Jonathan (Brecon)


Bates, Michael
Evans, Nigel (Ribble Valley)


Batiste, Spencer
Evans, Roger (Monmouth)


Bellingham, Henry
Evennett, David


Bendall, Vivian
Faber, David


Beresford, Sir Paul
Fabricant, Michael


Biffen, Rt Hon John
Fenner, Dame Peggy


Body, Sir Richard
Forman, Nigel


Bonsor, Sir Nicholas
Forth, Eric


Booth, Hartley
Fowler, Rt Hon Sir Norman


Boswell, Tim
Fox, Dr Liam (Woodspring)


Bottomley, Peter (Eltham)
Fox, Rt Hon Sir Marcus (Shipley)


Bottomley, Rt Hon Virginia
Freeman, Rt Hon Roger


Bowden, Sir Andrew
French, Douglas


Bowis, John
Fry, Sir Peter


Boyson, Rt Hon Sir Rhodes
Gale, Roger


Brandreth, Gyles
Gallie, Phil


Brazier, Julian
Gardiner, Sir George


Bright, Sir Graham
Gamier, Edward


Brooke, Rt Hon Peter
Gill, Christopher


Brown, M (Brigg & Cl'thorpes)
Gillan, Cheryl


Browning, Mrs Angela
Goodlad, Rt Hon Alastair


Bruce, Ian (South Dorset)
Goodson-Wickes, Dr Charles


Budgen, Nicholas
Gorman, Mrs Teresa


Burt, Alistair
Gorst, Sir John


Butcher, John
Grant, Sir A (SW Cambs)



Butler, Peter
Greenway, Harry (Ealing N)


Butterfill, John
Greenway, John (Ryedale)


Carlisle, John (Luton North)
Griffiths, Peter (Portsmouth, N)


Carlisle, Sir Kenneth (Lincoln)
Grylls, Sir Michael


Carrington, Matthew
Hague, Rt Hon William


Carttiss, Michael
Hamilton, Rt Hon Sir Archibald


Cash, William
Hamilton, Neil (Tatton)


Channon, Rt Hon Paul
Hampson, Dr Keith


Chapman, Sir Sydney
Hanley, Rt Hon Jeremy


Churchill, Mr
Hannam, Sir John


Clappison, James
Hargreaves, Andrew


Clark, Dr Michael (Rochford)
Harris, David


Clarke, Rt Hon Kenneth (Ru'clif)
Haselhurst, Sir Alan


Clifton-Brown, Geoffrey
Hawkins, Nick


Coe, Sebastian
Hawksley, Warren


Colvin, Michael
Hayes, Jerry


Congdon, David
Heald, Oliver


Conway, Derek
Heath, Rt Hon Sir Edward


Coombs, Anthony (Wyre For'st)
Heathcoat-Amory, Rt Hon David


Coombs, Simon (Swindon)
Hendry, Charles


Cope, Rt Hon Sir John
Hicks, Robert


Couchman, James
Higgins, Rt Hon Sir Terence


Cran, James
Hill, James (Southampton Test)


Currie, Mrs Edwina (S D'by'ire)
Hogg, Rt Hon Douglas (G'tham)






Horam, John
Peacock, Mrs Elizabeth


Hordern, Rt Hon Sir Peter
Pickles, Eric


Howard, Rt Hon Michael
Porter, Barry (Wirral S)


Howell, Rt Hon David (G'dford)
Porter, David (Waveney)



Howell, Sir Ralph (N Norfolk)
Portillo, Rt Hon Michael


Hughes, Robert G (Harrow W)
Powell, William (Corby)


Hunt, Rt Hon David (Wirral W)
Rathbone, Tim


Hunt, Sir John (Ravensbourne)
Redwood, Rt Hon John


Hunter, Andrew
Renton, Rt Hon Tim


Hurd, Rt Hon Douglas
Rifkind, Rt Hon Malcolm


Jack, Michael
Robathan, Andrew


Jackson, Robert (Wantage)
Roberts, Rt Hon Sir Wyn


Jenkin, Bernard
Robertson, Raymond (Ab'd'n S)


Jessel, Toby
Roe, Mrs Marion (Broxbourne)


Johnson Smith, Sir Geoffrey
Rowe, Andrew (Mid Kent)


Jones, Gwilym (Cardiff N)
Rumbold, Rt Hon Dame Angela


Jones, Robert B (W Hertfdshr)
Sackville, Tom


Jopling, Rt Hon Michael
Sainsbury, Rt Hon Sir Timothy


Kellett-Bowman, Dame Elaine
Scott, Rt Hon Sir Nicholas


Key, Robert
Shaw, David (Dover)


King, Rt Hon Tom
Shaw, Sir Giles (Pudsey)


Kirkhope, Timothy
Shephard, Rt Hon Gillian


Knapman, Roger
Shepherd, Sir Colin (Hereford)


Knight, Mrs Angela (Erewash)
Shepherd, Richard (Aldridge)


Knight, Rt Hon Greg (Derby N)
Shersby, Sir Michael


Knight, Dame Jill (Bir'm E'st'n)
Sims, Roger


Knox, Sir David
Skeet, Sir Trevor


Kynoch, George (Kincardine)
Smith, Sir Dudley (Warwick)


Lait, Mrs Jacqui
Smith, Tim (Beaconsfield)


Lamont, Rt Hon Norman
Smyth, The Rev Martin (Belfast S)


Lang, Rt Hon Ian
Soames, Nicholas


Lawrence, Sir Ivan
Speed, Sir Keith


Legg, Barry
Spencer, Sir Derek


Leigh, Edward
Spicer, Sir James (W Dorset)


Lester, Sir James (Broxtowe)
Spicer, Sir Michael (S Worcs)


Lidington, David
Spink, Dr Robert


Lilley, Rt Hon Peter
Spring, Richard


Lloyd, Rt Hon Sir Peter (Fareham)
Sproat, Iain


Lord, Michael
Squire, Robin (Hornchurch)


Luff, Peter
Stanley, Rt Hon Sir John


Lyell, Rt Hon Sir Nicholas
Steen, Anthony


MacGregor, Rt Hon John
Stephen, Michael


MacKay, Andrew
Stern, Michael


Maclean, Rt Hon David
Stewart, Allan


McLoughlin, Patrick
Streeter, Gary


McNair-Wilson, Sir Patrick
Sumberg, David


Madel, Sir David
Sweeney, Walter


Maitland, Lady Olga
Sykes, John


Malone, Gerald
Tapsell, Sir Peter


Mans, Keith
Taylor, Ian (Esher)


Marland, Paul
Taylor, John M (Solihull)


Marlow, Tony
Taylor, Sir Teddy (Southend, E)


Marshall, John (Hendon S)
Temple-Morris, Peter


Marshall, Sir Michael (Arundel)
Thomason, Roy


Martin, David (Portsmouth S)
Thompson, Sir Donald (C'er V)


Mates, Michael
Thompson, Patrick (Norwich N)


Mawhinney, Rt Hon Dr Brian
Thornton, Sir Malcolm


Mills, Iain
Thurnham, Peter


Mitchell, Andrew (Gedling)
Townend, John (Bridlington)


Mitchell, Sir David (NW Hants)
Townsend, Cyril D (Bexl'yh'th)


Monro, Rt Hon Sir Hector
Tracey, Richard


Montgomery, Sir Fergus
Tredinnick, David


Needham, Rt Hon Richard
Trotter, Neville


Neubert, Sir Michael
Vaughan, Sir Gerard



Newton, Rt Hon Tony
Viggers, Peter


Nicholls, Patrick
Waldegrave, Rt Hon William


Nicholson, David (Taunton)
Walden, George


Norris, Steve
Walker, Bill (N Tayside)


Onslow, Rt Hon Sir Cranley
Waller, Gary


Oppenheim, Phillip
Ward, John


Ottaway, Richard
Wardle, Charles (Bexhill)


Page, Richard
Waterson, Nigel


Paice, James
Watts, John


Patnick, Sir Irvine
Wells, Bowen


Patten, Rt Hon John
Whitney, Ray


Pawsey, James
Whittingdale, John





Widdecombe, Ann
Winterton, Nicholas (Macc'f'ld)


Wiggin, Sir Jerry
Wolfson, Mark


Wilkinson, John
Yeo, Tim


Willetts, David
Tellers for the Noes:


Wilshire, David
Mr. Simon Burns and Mr. Timothy Wood.


Winterton, Mrs Ann (Congleton)

Question accordingly negatived.

Main Question put forthwith, pursuant to Standing Order No. 60 (Amendment on Second or Third Reading), and agreed to.

Bill read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).

Orders of the Day — NATIONAL HEALTH SERVICE (RESIDUAL LIABILITIES) BILL [MONEY]

Queen's recommendation having been signified—

Motion made, and Question put forthwith, pursuant to Standing Order No. 50A(1)(a),

That, for the purposes of any Act resulting from the National Health Service (Residual Liabilities) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to that Act in the sums payable out of money so provided under any other enactment.—[Mr. Bates.]

Question agreed to.

Orders of the Day — DEREGULATION

Mr. Deputy Speaker (Sir Geoffrey Lofthouse): With permission, I shall put together the motions relating to delegated legislation.

Motion made, and Question put forthwith, pursuant to Standing Order No. 14A (Consideration of draft deregulation orders),

That the draft Deregulation (Special Hours Certificates) Order 1996, which was laid before this House on 19th February, be approved.

That the draft Deregulation (Friendly Societies Act 1992) Order, which was laid before this House on 12th February, be approved.—[Mr. Bates.]

Question agreed to.

Orders of the Day — Electricity Pricing

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]

Mr. Paul Tyler: At this time of night, matters of interest and concern in relation to the privatised utilities are familiar territory to you, Mr. Deputy Speaker, and to the House. The regulators of those utilities often feature largely in such discussions. They include Offer, the Office of Electricity Regulation, Ofgas, the Office of Gas Supply and Ofwat, the Office of Water Services. We have not yet had Offrail or Offmilk, which were threatened at one stage. If the weekend recommendation that the monarchy might be privatised were accepted, we might find ourselves discussing Offcrown or, indeed, Offhead.
Despite the time of night, it is important to recognise that there is an issue of national significance here, although I shall also consider it in relation to the part of the south-west that I represent. There is consumer representation, which is extremely important, but the committees that represent the consumer increasingly find that their concerns are not being fully reflected in the way in which the industry is regulated. That applies to all the privatised utilities.
To a large extent, that is due to the buck-passing between the Minister and regulator in each of the respective sectors. The powers that each has and their inter-relationship is as important as the regulators' statutory responsibility. My colleagues in the south-west and I had a meeting today with professor Stephen Littlechild, regulator of the electricity industry. That clarified the borders of his responsibilities vis à vis the Minister.
Clearly, unbridled competition between regional electricity companies, the so-called RECs, is pre-supposed because that is what privatisation is all about. Equally, that competition pre-supposes elimination of the cross subsidies that were a feature of those utilities.
The National Grid, however, is a different matter: it is a national monopoly. It would indeed be a political decision to insist on full distance-related charges, especially if such charges now arise disproportionately. At the time of privatisation, assurances were given that the grid would remain a national service. Compare this privatisation with, for instance, the privatisation of British Telecom. What if, in those circumstances, that entire national service had been subjected to a straight distance-related charge? There would have been uproar by now, especially in the more peripheral parts of the United Kingdom.
The chairman of the South West electricity consumers committee has drawn the attention of hon. Members representing my region to a new development. He writes:
The Office of Electricity Regulation has recently unveiled proposals to increase the electricity transmission charges imposed by the National Grid Company on electricity supplied to the South West. As you will know, customers in the South West are already penalised by a charging structure which takes account of the distance that power has to be transmitted from the generating stations,

predominantly in the North of England, to the consumer. It is now proposed that the costs of losses on the transmission system be recouped in the same manner.
The existing charging structure already means that electricity customers in the South West pay more than almost anywhere else in the country. These latest proposals could mean further increases of up to 2 per cent., with Devon and Cornwall being particularly badly affected.
I emphasise that, although the chairman referred to the south-west, the principle will apply throughout the country, and the more peripheral areas furthest away from the centres of generating capacity will suffer similarly.
An excellent overview by the Centre for the Study of Regulated Industries shows that the typical South Western Electricity domestic bill for 1994–95, after rebates, was £303.66—the highest in England. I know that Conservative Members representing my region will share my fear that, having already reached the highest point, we are likely to be pushed even further away from the norm.
There are, of course, many factors at work, and the future is very unclear. The CRI brief shows that a number of influences may affect future prices: National Grid rebates, distribution price controls and the sale of the nuclear elements of the generating industry—and, indeed, the extent to which that may or may not be postponed, and its effect on the nuclear levy. There are also the reductions in overall generating prices as a result of new contracts; and who knows what competition will do?
I do not want to overestimate the extent to which the latest development to which our attention has been drawn will alter the overall level of electricity costs in the south-west, or, indeed, other areas that are similarly affected. One thing is certain, however: the cumulative disadvantage is likely to increase rather than decrease. That was recognised today—by complete coincidence, as far as I am aware. In Northern Ireland, it has now been acknowledged that the discrepancy requires the award of a £60 million grant. Some of us in other parts of the United Kingdom may feel that our case is almost as strong. All areas of this kind—the south-west, Wales and Northern Ireland being the most obvious—tend to contain more small industrial firms, so they cannot even benefit from the high-volume tariffs that are comparatively common elsewhere.
Along with my south-west Liberal Democrat colleagues who are here this evening, and who attended our meeting with the regulator this afternoon, I have some special concerns. If the differential is allowed to increase, even discriminating within the South Western Electricity area—more specifically, for each National Grid zone within that area—regions such as Cornwall and Devon will be hit particularly hard. That will add to the existing calamitous water and other household costs in an area where, after the initial experiment with gas competition, we are bound to face higher prices than other parts of the country.
I need hardly remind the House that the south-west has high unemployment and low household incomes. Cornwall is especially badly affected by both. The cumulative effect of that series of differentials is disastrous.
There are wider implications for similar parts of the country. Professor Littlechild agrees with that but has also said:


there are important advantages in more cost-reflective transmission charges. Better pricing signals will encourage investment in new generation plant in areas where it is needed, like the south-west. This would also increase energy efficiency, reduce the need for new transmission lines and benefit the local economy.
The House will immediately realise that those signals will be effective only if they are aimed at the appropriate decision makers. That is a sine qua non. Secondly, they must be sufficiently powerful to offset other economic factors pulling in the opposite direction. No one will decide on the basis of the so-called signals to invest in new generating capacity in an area such as Cornwall without other factors being brought into play. There is evidence that the signals will, in the present circumstances, fail on both counts.
If the signals are imposed on the consumer, they will have no impact on the decision makers. The generators take investment decisions, not the consumers. In the past, consumers have had little or no impact on generating capacity. It should be remembered that in the far south-west, the Central Electricity Generating Board closed down power stations at Hayle, Plymouth and Yelland against local opposition. Many of us felt that employment, economic potential and spreading energy capacity around the country were important objectives that those decisions went against.
The decision makers ignored the effect on local people then, so why should they listen to local consumers now? It is ironic that the CEGB took those decisions on the specific ground that transmission charges from elsewhere in the United Kingdom were likely to be so low that the closures would be cheaper than continuing local generation, which they argued would be too expensive. Some hon. Members here tonight will recall those decisions being made against local opposition.
Offer and the RECs cannot have it both ways. If they argue, as they appear to, that the costs will be only marginal, clearly they will have only a marginal impact.
Our discussions with the regulator this afternoon appeared to move towards a possible solution. That is why at the outset of my speech, I emphasised the difference between the responsibilities of the regulator and those of Ministers. It appears that the only way to achieve the possible remedy is by ministerial direction. If we could find a mechanism to ensure that the decision makers—the generators—have to bear the extra cost of inefficient transmission over long distances in a way that safeguards the position of consumers in vulnerable areas such as the south-west, there is clearly some prospect for success. That would apply perhaps to Wales, and for all I know, to Northern Ireland.
Professor Littlechild acknowledged the force of that argument in respect of both tests—its effect on decision makers and its economic impact—and that that course would be preferable. It was clear from our discussions with him this afternoon that if extra burdens on south-west consumers were imposed, they would be damaging. However, it was equally clear that those burdens are by no means automatic. They do not have to follow from the decision to try to cut out all cross-subsidies but it will need Government intervention to prevent them doing so.

Mr. Matthew Taylor: Perhaps I can help to persuade the Minister of the case. He represents the

Department of Trade and Industry, which spends considerable sums trying to support business in the south-west. There is little point in that money being spent if it is cancelled out by the extra costs on business from electricity charges. Therefore, our suggestion could be a net saving to the Department as it would not have to spend money overcoming problems that it is itself creating.

Mr. Tyler: My hon. Friend makes a valid point. I am sure that the Minister will acknowledge that the disincentive to incoming investment and, perhaps, to the natural growth of companies already resident in the region is extremely important to avoid if we are to achieve a more economically successful region and, indeed, save the hon. Gentleman and his Department money in the long run. It is precisely this sort of signal, as the regulator calls it, that can discourage people from bringing their investment in new businesses and jobs to a region such as ours, which so desperately needs them.
That is why we lay such emphasis on what is otherwise seen as a comparatively marginal difference between our region and other regions. For example, if a business is contemplating moving either to Scotland, where electricity costs are comparatively low, or to the south-west, which may be comparable in other ways, it is yet another disincentive to come west and an incentive to go north. As Conservative Members as well as my Liberal Democrat colleagues have been able to establish in recent weeks, there have been huge incentives to take people north of the border. This could be yet another factor.
Left to themselves, in the present regime the National Grid Company, the regional electricity companies and Professor Littlechild seem almost bound to end all cross-subsidy. In those circumstances, the consumers in those areas furthest from the power stations will pay full distance-related charges. It need not be so. If Ministers so choose, they could instruct that the differentials were borne by the generators, not the end consumer—be it business, commercial, industrial or domestic. Not only would that obviously benefit all those consumers—and, as I have just said, in the wider economic sense be a huge benefit to the south-west and similar areas—it would also encourage a revival of generating capacity in those areas.
I fear that without that ministerial intervention the far south-west will be destined to suffer the worst penalties of privatisation in every direction. I therefore plead with the Minister at least to take seriously the suggestion made today, as a result of our discussions with the regulator, and to look at a different mechanism that could avoid this disaster.

The Minister for Small Business, Industry and Energy (Mr. Richard Page): I congratulate the hon. Member for North Cornwall (Mr. Tyler) on raising this subject for tonight's debate and on giving me this opportunity to say a few words in response. I hope that he will understand if I do not follow him down the side track of saying what an excellent record the Government have on producing inward investment in the south-west.
I want to say a few words about the background to electricity privatisation and the way in which electricity prices are determined under the regulatory regime that the Government put in place at the time of privatisation. I shall then come to the issue that the hon. Gentleman raised of regional variations in electricity prices.
A key point about the Government's policy for the restructuring and privatisation of the electricity industry was that
Decisions about the supply of electricity should be driven by the needs of customers.
The privatisation framework was also guided by a number of further principles: for example, that competition is the best guarantee of the customer's interests; that regulation should be designed to promote competition, oversee prices and protect the customer's interests in areas where natural monopoly will remain; that security and safety of supply must be maintained; and that customers should be given new rights, not safeguards.
The Government's reorganisation of the electricity industry before privatisation provided the framework for giving effect to those principles. The old Central Electricity Generating Board was divided into three competing generators—National Power, PowerGen and Nuclear Electric. The National Grid was transferred to the ownership of the 12 regional electricity companies, and it was responsible for electricity transmission and the independent central dispatch of electricity generating plant. Regional electricity companies are facing increasing competition in their authorised areas as their franchise markets are progressively reduced.
An important part of the electricity privatisation framework has been the creation of an independent regulator. The hon. Gentleman referred to the Director General of Electricity Supply and to the conversations and the meetings that he has had with him. That man is the head of the Office of Electricity Regulation and his job is to promote competition and to constrain the activities of the remaining monopolies and dominant suppliers.
This framework has brought significant benefits to the electricity consumer. For example, since privatisation prices have fallen, domestic prices have fallen by 7 per cent. in real terms—excluding VAT—and industrial prices have fallen by 10 per cent. in real terms. There have been some genuine new rights for customers, in the form of the ability of customers outside the RECs' franchise markets—which are being progressively reduced, and which will be ended completely by 1998—to shop around and select a supplier of their choice. There are guaranteed standards of performance of supply for tariff customers, set by the DGES, covering aspects such as the need to keep appointments on the date specified and fixed amounts of compensation for customers in the event that the guaranteed standards are not met.
There are overall performance standards that the RECs are to meet, such as the minimum percentage of supplies to be reconnected following faults within three hours and within 24 hours. There are new codes of practice to cover matters such as how to handle customer complaints, the efficient use of electricity, services for the elderly and disabled, and arrangements for paying bills. Customers have the opportunity to complain to an independent regulator, the DGES, and for those complaints to be investigated by the Office of Electricity Regulation.
In 1990, the RECs' transitional franchise market—the market within which the RECs were the monopoly suppliers—comprised sites taking 1 MW or less, and in April 1994 it was reduced to sites taking 100 kW or less. In April 1998—in just over two years' time—the franchise will be ended, and all customers, including domestic customers, will have a choice of supplier. Within the franchise market, electricity prices are controlled by the DGES.
The price of electricity is made up of four elements: first, the wholesale purchase cost of the electricity to the REC, which the REC may pass through to the retail price; secondly, the cost of transmitting the electricity from the generating station, through the National Grid's transmission system, to the REC's system of wires; thirdly, the cost of distributing the electricity over the REC's system, which accounts for some 25 per cent. of the electricity price, and has been subject to price controls that have required real price decreases in this component of the final electricity price; and, fourthly, the fossil fuel levy and value added tax.
The final cost of the electricity used by the hon. Gentleman's constituents reflects all four of these elements. Even taking VAT into account, real domestic electricity prices are no higher than they were before privatisation—since privatisation, they have fallen by about 7 per cent., excluding VAT.
There are further decreases to come. As we all know, domestic customers of the RECs have received a one-off discount of £50 on their electricity bills under the terms of the flotation of the National Grid in December. The tightening of the distribution price control, announced by the Director General of Electricity Supply in July 1995, will bring a 3 per cent. reduction in real electricity prices as from 1 April. The reduction in the rate of the fossil fuel levy at the time of privatisation of the nuclear generating stations will bring another further significant reduction in electricity prices later this year.
The main point raised by the hon. Member for North Cornwall concerned regional variations in electricity prices. In the context of the elements that I have just enumerated, that means the distribution and transmission price controls; and there is a link with transmission losses, so I shall say a few words about that.
There is nothing too surprising about the existence of regional variations in prices; indeed, regional price variations are to be found in commodities separate from electricity. They can be found in such things as tea and houses, and they are a natural and unsurprising consequence of underlying regional differences in market conditions. There is not too much that anyone can do about the geographical and demographic conditions that push up supply costs to the more remote and sparsely populated regions of the isles. Against the background set by the differences, however, it is important that the severity of regulation should take into account, case by case, the extent of the scope for cost reduction in different areas.
Consequently, the director general sets the distribution price control separately for each of the 12 RECs. The revised controls that he announced last summer mean that the aggregate required reduction in the distribution charges by South Western Electricity over the period 1994–95 to 1999–2000 will be nearly one third in real terms—to be precise, 30 per cent. Some other RECs have had more severe reductions while others have had smaller ones.
At present, electricity transmission losses are charged on a uniform basis throughout the country. However, annual rates for transmission losses have increased by about £30 million in the past few years and the director general has said that customers would get a better deal if charges for transmission were more cost-reflective—that is, if they related more closely to the typical distances that


electricity must travel from generator to customer. That is part of the point that the hon. Member for North Cornwall made.
A more cost-reflective basis of charging would bring reductions in charges to some, but the reverse side of the coin, fairly obviously, is that Professor Littlechild has acknowledged that it would mean increases to others. He said, however, that any such increases in transmission charges should not exceed 12 per cent. of the electricity price in any region and would be more than offset by the reduction in charges to those customers resulting from the implementation of the new distribution price controls.
Professor Littlechild has commented—this returns to one of the points that the hon. Member for North Cornwall made—that customers alone should not bear those charges. He said:
Generators should also share the charge for transmission losses, since the most important single need is to inform decisions on the location of new generation".
Within government, that is a matter for the director general. He has called on the electricity pool to make proposals by the end of the month. The director general has suggested that if the pool considers that it cannot deal adequately with transmission losses by that time, it should transfer responsibility to the National Grid so that necessary arrangements can be put into effect in good time. That brings me, as night follows day, to the subject of transmission price control.
The original transmission price control covered the period from 1990 to 1993, and restrained the National Grid's average regulated revenue per kilowatt to increase by no more than the rate of inflation. In 1992, the Director General of Electricity Supply reviewed that control, and tightened it to "RPI minus 3" for three years as from April 1993. That means that the National Grid's average regulated revenue per kilowatt has had to reduce in real terms by 3 per cent. a year for three years. Those effects are all reflected in the present electricity price level, and they will bring a further decrease in transmission charges as from this April.

Mr. Nick Harvey: Will the Minister give way?

Mr. Page: I do not mind briefly giving way, but if I cannot finish my speech it will be on the hon. Gentleman's head.

Mr. Harvey: The Minister is referring to overall reductions in transmissions. He said that other commodities show a price differential between regions, as though that were an act of God over which there was no control. Does he accept that, because the transmission part of the electricity industry remains a monopoly, it is a matter of policy whether there is economic costing, differentiating by region, or whether the costs are shared equally, as they have been until now? That is a matter of policy that might be controlled.

Mr. Page: I understand what the hon. Gentleman is saying, but as I said at the outset, the director general has been given specific tasks to achieve and—in being given those tasks—he has also been given a certain independence. If someone is given independence, he or she is expected to exercise it. Therefore the arguments to the director general have to be advanced; much of what I have said tonight shows that so much of the decision making will be in the director general's hands.
In November, the DGES began to consider the revised transmission price control to apply from 1 April 1997. He issued a consultation paper and asked for comments by the end of January. I understand that the DGES hopes to announce the revised control later this year and that it will take effect from 1 April 1997. That is a matter for the DGES. An important aspect of the regulatory system—introduced at the time of privatisation—is that the DGES is independent. His statutory duties include protecting the interests of the customer and promoting efficiency and economy on the part of the electricity licensees.
The hon. Gentleman has already expressed his concerns fairly forcefully, and I am sure that he will state them in writing to the DGES. I shall draw the contents of the debate to the attention of the DGES and flag up the hon. Gentleman's concerns. My hon. Friend the Member for South-East Cornwall (Mr. Hicks) has also made his views known to me. I advise the hon. Member for North Cornwall to lobby the director general enthusiastically so that he may take into account those views when he conducts the review of electricity transmission charges.

Question put and agreed to. Adjourned accordingly at fourteen minutes to Eleven o'clock.